KUALA LUMPUR: Palm oil futures climbed, tracking increases in rival soybean oil as a drought damages crops in Argentina, the biggest shipper of vegetable oil and animal feed made from the oilseed.
Futures gained after Argentinaa��s government cut its forecast for soybean planting this year because of the worst drought in at least four decades.
Soybeans are crushed to produce soybean oil, which is used in food and alternative fuels.
a�?We are now less negative on the plantation sector,a�? Ivy Ng, analyst at CIMB Research Sdn, wrote in a report yesterday.
a�?Palm oil price stabilisation measures have been introduced, fertiliser costs have come off from their high and there are rising supply risks stemming from adverse weather conditions in major planting areas in South America.
a�? Palm oil for April delivery added as much as 1.6 per cent to RM1,838 a tonne on the Malaysia Derivatives Exchange before trading at RM1,830 at the 12.30pm local break.
In Argentina, farmers will plant 16.5 million hectares with soybeans, down 7.3 per cent from a previous estimate of 17.8 million hectares, the Agriculture Secretariat said.
Soybean oil gained 0.6 per cent to 34.16 cents a pound in after-hours trade on the Chicago Board of Trade.
Still, Ng is expecting palm oil prices to average RM1,600 a tonne in 2009, and RM1,900 a tonne in 2010.
The vegetable oil averaged RM2,851.75 last year.
a�?These positives are offset by concerns over a weakening of edible oil demand growth due to a sharper-than-expected global economic downturn, lower-thanexpected crude oil prices, high palm oil inventories and declining government interest in biofuel mandates,a�? said Ng.