SINGAPORE: Malaysian palm oil rose for an eighth consecutive session on Monday to its highest since Nov. 12 as floods in the country’s key producing states reduced supplies of the world’s most traded vegetable oil.
Severe monsoon flooding in Malaysia that has forced more than a hundred thousand people to evacuate, is likely to cause a bigger-than-expected disruption to crude palm oil production, planters and traders said.
By Monday’s close the benchmark March contract had jumped 1.6 percent to 2,286 ringgit ($654) per tonne, after hitting 2,308 ringgit, the benchmark’s highest since Nov. 4.
Traded volume stood at 39,627 lots of 25 tonnes, above the daily average of around 35,000 lots traded.
Floods in key palm-growing areas would hinder harvesting, transportation and crushing of fresh palm fruit, leading to tighter supplies in December and early 2015.
“The floods have brought massive short covering in the market,” said one Kuala Lumpur-based trader. “Nobody wants to stay short with the worst floods in 20 years. This worsening weather will keep production low well into the first quarter of 2015.”
A group of millers in southern peninsular Malaysia estimated that crude palm oil production between Dec. 1-25 over the states of Johor, Pahang and Melaka plunged 37 percent from November, according to traders.
The Malaysian Palm Oil Association, a group of growers, forecast that crude palm oil production in Malaysia fell 21 percent in the Dec. 1-20 period compared to a month ago.
The floods in Malaysia lifted U.S. soybean futures to a two-week high as they may erode global edible oil supply.
Dalian soybean oil gained 1.71 percent.
Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm products during Dec. 1-25 fell 2.3 percent to 1,077,140 tonnes compared with the month-ago period – the first drop this month as shipping activity slowed for the year-end holiday season.