Palm oil futures climbed the most in more than a week after rival soybean oil advanced on speculation that dry weather will curb oilseed yields in Argentina and Brazil, straining global cooking oil supplies. The March-delivery contract climbed as much as 2.3 percent to 3,894 ringgit ($1,267) a metric ton and closed the morning session at 3,879 ringgit on the Malaysia Derivatives Exchange. Prices reached a 34-month high on Jan. 4 on concerns inventory in Malaysia, the second-biggest producer, may have dropped to a five-month low in December. “The seasonal drop in palm oil output will be more than normal this year, and with global demand for vegetable on the rise, it’s a recipe for prices to climb further,” said Ben Santoso, an analyst at DBS Vickers Securities Singapore) Pte. “The supply tightness is relatively worse in the case of palm oil and that’s why it’s as expensive as soybean oil now.” Palm oil has rallied 69 percent in the past six months on concern that cooking-oil supplies may tighten as dry weather in Argentina weakened the crop in the largest soybean-oil producer and rains damaged oil-palm harvests in Indonesia and Malaysia. The rally has made the tropical commodity less attractive than the rival soybean oil. Soybean oil’s premium to palm oil narrowed to $19.6 a ton today from $33.3 a ton yesterday, according to Bloomberg data. Soybean oil traded at a discount of $14.30 a ton to palm oil on Jan. 4, the first time since June 2007 that the oil has been cheaper than the tropical vegetable oil. ‘Significant Correction’ March-delivery soybean oil advanced as much as 0.8 percent to 58.24 cents a pound, and traded at 58.23 cents at 12:02 p.m. Singapore time. Futures jumped 13 percent last month. “There won’t be any significant correction anytime soon,” DBS Vickers’ Santoso said. “The market is still awaiting data points to ascertain the soybean supply situation in Argentina, and if China continues to import huge quantities, prices will stay supported.” China’s December soybean imports may be 5.3 million tons, Grain.gov.cn said in an e-mailed report on Dec. 23. Shipments for January and February are forecast at 5 million tons and 3.5 million tons, respectively, it said. Grain.gov.cn is a unit of the China National Grain & Oils Information Center. The country accounts for 60 percent of global soybean imports, according to Rabobank Groep NV. Palm oil for September delivery on the Dalian Commodity Exchange surged as much as 3 percent to 10,088 yuan ($1,523) a ton and soybean oil for delivery in the same month climbed as much as 2.8 percent to 10,808 yuan a ton. CME Group Inc.’s March palm oil contract, pegged to the Malaysian benchmark price, gained as much as 0.8 percent to $1,266 a ton and traded at $1,262.75 at 12:13 p.m. in Singapore. To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net; To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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