Palm Oil Hits 7-Month High on Indian Demand

Palm oil prices jumped 2.6 percent to their highest level in more than seven months on anticipation demand will increase in India, the world’s no. 2 palm oil consumer.

Palm oil prices, which have more than doubled in the last decade, have rallied 57 percent this year, the biggest annual advance in 12 years, on rising demand from India and China, the biggest consumer.

Tight supplies of soybean oil earlier this year, due to drought damage in South America, have also fueled price gains.

“Demand is expected to be quite strong, especially from India, now the soybean harvesting is done and yields are not improving,” said Ben Santoso, an analyst at DBS Vickers Securities in Singapore.

March-delivery palm oil gained 68 ringgit ($19.86) to 2,663 ringgit a metric ton on the Malaysia Derivatives Exchange, the highest close since May 15.

Palm oil is expected to trade between 2,200 and 2,800 ringgit next year and the higher part of that range should happen sometime in the first quarter of 2010,” Santoso said. “I don’t expect any moderation until the end of the second quarter of next year.”

September-delivery palm oil traded on the Dalian Commodity Exchange jumped 3.2 percent to 7,276 yuan ($1,066) a ton, the highest since Sept. 4, 2008.

Vegetable oil imports by India may increase 4.6 percent to 9 million tons in the year started Nov. 1, compared with 8.6 million tons last year, Govindlal G. Patel, director of Dipak Enterprise, said in early December.

Palm oil accounts for 80 percent of India’s total vegetable oil purchases. India halted a tax on imports of the commodity in April last year, and in March lifted a 20 percent duty on shipments of crude soybean oil to compensate for a lower domestic crop.

India’s oilseeds production in the 2009-2010 season may drop 9 percent to 13.7 million tons after a drought in almost half the country curbed planting, the Central Organization for Oil Industry and Trade, said in November.

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