Palm
oil headed for the first annual advance in three years as demand increases for
the vegetable oil used in everything from noodles to biofuel amid a drop in
production in Indonesia, the world’s biggest supplier.
The
contract for March delivery climbed 0.2 percent to
2,635 ringgit ($802) a metric ton on the Bursa Malaysia Derivatives by midday
break, extending gains to 8 percent this year, the
first annual gain since 2010.
Palm
entered a bull market in November as output fell at plantations in Indonesia
and biodiesel demand increased. Prices may advance to 3,000 ringgit by March as
demand climbs, according to Dorab Mistry,
director at Godrej International Ltd. Indonesian output will decline by 500,000
tons to 27.5 million tons this year, before rebounding to 30.5 million tons in
2014, said Mistry. That would be the first drop since
1998, according to data from the U.S. Department of Agriculture.
“Demand
for palm oil has been higher in food as well as fuel this year,” said Prathamesh Mallya, an analyst at AnandRathi Commodities Ltd. in Mumbai. “Production will be
lower in Malaysia in 2014 on rains, which will drive prices higher.”
Exports
from Malaysia, the world’s second-biggest producer, fell 1.1 percent to 1.43 million tons this month from November, Intertek said on 31 Dec.
Soybean
oil for March delivery was little changed at 38.95 cents a pound on the Chicago
Board of Trade. Soybeans were at $13.0850 a bushel from $13.0875 on 30 Dec.
Refined
palm oil for May delivery fell 0.5 percent to 6,036 yuan ($997) a ton on the Dalian Commodity Exchange. Soybean
oil decreased 0.6 percent at 6,864 yuan.