Palm Oil Gains to Record on Demand for Food, Fuel

Palm oil prices in Malaysia, the global benchmark, rose to a record today as global demand for vegetable oils for food and alternative fuel outstripped supply.

Oilseeds and vegetable oils are gaining from Chicago to Dalian on concern world inventories are dwindling as demand rises in China and India and governments subsidize the use of edible oils for fuel. Soybeans may lead gains among non-energy commodities next year, according to Goldman Sachs Group Inc.
Soybeans and soybean oil in China, the biggest consumer of the commodity, also soared to records as traders speculated demand may outpace supplies from government stockpile sales and imports. Soybeans in Chicago reached a 34-year peak and soybean oil the highest for at least 33 years on Dec. 24.

“The outlook for the grain, oilseed and vegetable oil markets remains very positive,” Michael Coleman, Singapore- based managing director of Aisling Analytics Pte, which runs a $1 billion commodity hedge fund, said today by e-mail.

“To see significantly lower prices we’ll need a combination of demand rationing and excellent harvests to allow a rebuilding of inventories,” he said. “That probably means significantly higher prices first.”

“Palm oil prices have gone up in spite of record-high stockpiles in Malaysia because the market is anticipating tight supply next year,” Alvin Tai, analyst at OSK Research Bhd., said by phone from Kuala Lumpur today.

Bloomberg