Palm oil climbed to a 33-month high on concern a prolonged drought in regions of South America may reduce output of soybeans, boosting the demand outlook for vegetable oils made from other plants. March-delivery palm oil on the Malaysia Derivatives Exchange gained for a seventh day, climbing as much as 1 percent to 3,792 ringgit ($1,226) a metric ton, the highest price since March 2008. The contract traded at 3,772 ringgit a ton by the 12:30 p.m. local-time break. Soybeans in Chicago advanced to a 28-month high. The drought in Argentina, brought on by the La Nina weather event, may expand to parts of Brazil, depleting soil moisture and increasing stress to crops in the area, Telvent DTN Inc. said in a forecast yesterday. The two countries are the world’s second and third-largest shippers of soybeans and corn. “Soybeans are the main driving factor,” Vijay Mehta, director at Commodity Links Pte, said from Singapore today. The expectation is that “there will be a drop in output.” Argentina’s soybean harvest may shrink 21 percent next year as dry weather delays planting and worsens growing conditions, Oil World said on Dec. 21. Output in five South American growing nations may drop by 8 million to 10 million tons, the researcher said. This year’s planted soybean crop in Argentina may fall by 200,000 hectares to 18.5 million hectares because of dry conditions, the Buenos Aires Cereals Exchange on Dec. 23. Palm oil, which competes with soybean oil in food and biofuel uses, has risen 41 percent this year, heading for a second annual gain, on concern that rising demand from China and India, the biggest users, may strain global cooking-oil supplies curbed by rain and drought. Soybeans Rise Soybean futures for March advanced as much as 0.8 percent to $13.95 a bushel, the highest price for the most-active contract since August 2008. March-delivery soybean oil in Chicago rose 0.1 percent to 57.80 cents a pound, taking this year’s gain to 42 percent. The La Nina weather event has lowered oil-palm yields and disrupted harvesting in Indonesia and Malaysia, the two largest producers, while drought in South America has affected soybean crops. Increased demand for food in Asia will help boost prices next year, fueling faster inflation, Yougesh Khatri, a senior economist at Nomura Holdings Inc., said on Dec. 24. Still, demand from South Asian countries including India, Pakistan and Bangladesh is “dead,” Mehta said. Buyers for palm oil in particular are “very quiet, due to the high prices and huge disparity in the local market.” “The market has almost reached a point where it really needs” to undergo a correction, only then will some buying interest come back in, Mehta said. He expects palm oil prices to reach 4,000 ringgit a metric ton in January. Palm oil for September on the Dalian Commodity Exchange gained as much as 1.6 percent to 9,890 yuan ($1,493) a ton and was at 9,854 yuan at the 11:30 a.m. local-time break. Dalian soybean oil rose as much as 1.7 percent to 10,662 yuan a ton before settling at 10,636 yuan by the break. CME Group Inc.’s March palm-oil contract gained 0.5 percent to $1,217 a ton at 11:35 a.m. Singapore time. To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net To contact the editor responsible for this story: Richard Dobson at Rdobson4@bloomberg.net

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