DJ Asian Crude Palm Oil Ends Up 0.9% On Crude, U.S. Soybean Crop Fears

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange Thursday pared losses after hitting an eight-month low Wednesday, buoyed by a rally in soybean futures in Chicago on speculation that heavy rain would reduce yields in the U.S., improving demand prospects for palm oil.

The benchmark September contract on the Bursa Malaysia Derivatives exchange ended MYR20 or 0.9% higher at MYR2,290 a metric ton after moving in a MYR2,286-MYR2,310 range.

The market got a boost from rally in external markets including crude oil, and a drop in soybean crop ratings, giving spillover buying interest in palm oil market.

August crude oil on the New York Mercantile Exchange rose as much as 1.4% to $75.10 a barrel in Asia. At 1011 GMT, August contract was trading 78 cents higher at $74.85/bbl.

"Any further weather issues (in U.S.) may lift (palm) prices higher. And those on short positions will be treading cautiously," said a Kuala Lumpur-based trading executive.

Soyoil futures rose to a one-week high Wednesday on the Chicago Board of Trade on support from lower soybean crop outlook. December soyoil ended 100 points higher at 37.69 cents a pound.

Nevertheless, concerns about rising output and end-month inventory levels will cap the rise in palm prices.

"Prices need to end above MYR2,330-MYR2,340/ton levels in the next trading session to sustain gains," said a Kuala Lumpur-based analyst.

June output probably rose 5%-10% on month and the supply may rise further in July as the palm oil sector in Malaysia moves into the high output cycle period, trade participants and analysts said.

The Malaysian Palm Oil Board is expected to issue Malaysia palm oil production, stock and export data for June on Monday.

In the cash market, palm olein for September was traded at $755/ton and both October/November/December and January/February/March shipments traded at $747.50/ton, said a Singapore-based trading executive.

Cash CPO for prompt shipment was offered MYR20 higher at MYR2,410/ton.

CME Group Inc.'s dollar-based CPO futures contract for September wasn't traded in Asia.

Rupiah-denominated September CPO futures on the Indonesia Commodity and Derivative Exchange were trading 1.1% higher at IDR6,270 a kilogram at 0924 GMT, with 123 lots done.

The October contract was trading 0.9% higher at IDR6,200/kg with 208 lots changing hands. One lot is equivalent to 10 tons.

Open interest on the BMD was 74,093 lots, versus 74,304 lots Wednesday. One lot is equivalent to 25 tons.

A total of 14,674 lots of CPO were traded versus 14,018 lots Wednesday.

Closing BMD CPO futures prices in MYR/ton at 1000 GMT: 
 
Month   Close  Previous  Change   High    Low 
Jul'10  2,420     2,398  Up  22   2,423   2,410 
Aug'10  2,330     2,305  Up  25   2,349   2,325 
Sep'10  2,290     2,270  Up  20   2,310   2,286 
Oct'10  2,275     2,250  Up  25   2,294   2,270 
 
 
  By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com