By Ranjeetha Pakiam and Thomas Kutty Abraham

Bloomberg

10 November, 2010

Nov. 10 (Bloomberg) — Palm oil stockpiles in Malaysia, the world’s second-largest producer, climbed to the highest level in nine months after output increased and exports dropped.

Inventories of the edible oil, used mostly in cooking, gained 4.9 percent to 1.79 million metric tons in October from a month earlier, the Malaysian Palm Oil Board said in a statement today. Output climbed 4.71 percent to 1.64 million tons, the highest monthly production in a year, and exports dropped 0.6 percent to 1.46 million tons, it said.

Palm oil futures have climbed to the highest level in more than two years on speculation that the increase in production in Malaysia may lag behind consumption and record Chinese demand for soybeans will keep prices of the rival oil high.

“Demand for palm oil may remain subdued with winter setting in countries like India,” Prasoon Mathur, an analyst at Religare Commodities Ltd., said by phone from Noida, near New Delhi. “We can expect some pressure on prices in the near term also because palm oil has rallied so much in such a short time.”

January-delivery futures on the Malaysia Derivatives Exchange gained as much as 1.4 percent today to 3,410 ringgit ($1,101) a ton, the highest level since July 2008.

Palm oil is the world’s most-used plant oil, accounting for 33 percent of global vegetable-oil consumption, according to estimates from the U.S. Department of Agriculture. It’s followed by soybean and rapeseed oils, which make up 28 percent and 16 percent of use, respectively, the USDA says.

Exports from Malaysia fell 1.1 percent to 390,534 tons in the first 10 days of November from the same period a month earlier, independent market surveyor Intertek said today.

Palm oil in Malaysia has rallied for 10 weeks, gaining about 32 percent on concern heavy rain may disrupt harvests in Malaysia and Indonesia.

“The outlook for vegetable oils remains bullish because the supply shortfall can’t be met in the short term,” Religare’s Mathur said. “There could be some profit taking from the end of November because of technical reasons.”

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