Palm oil headed for a second monthly advance on speculation that production in Indonesia, the world's largest supplier, may decline this year as weather curbs yields.
The contract for delivery in February was little changed at RM2,653 (US$822) a metric tonne on the Bursa Malaysia Derivatives at the mid-day break in Kuala Lumpur, after climbing to RM2,656 yesterday, the highest price at close since September 2012. Futures rose 2.3 per cent this month, poised for the first annual increase in three years.
Palm output in Indonesia will drop 1.9 per cent to 26.5 million tonnes this year, according to the median of five grower estimates compiled by Bloomberg. That's the first decline since 1998, according to data from the US Department of Agriculture, which sees a 28.5 million tonne crop.
"The uncertainties over Indonesia's palm oil production are lending support to prices," said Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services in Mumbai. "There may be some temporary bullishness but when prices come close to the RM2,700 psychological mark, it will be met with a lot of resistance."
Refined palm oil for May delivery gained 0.3 per cent to 6,334 yuan (US$1,040) a tonne on the Dalian Commodity Exchange. Soybean oil climbed 0.3 per cent to 7,272 yuan.
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