03/04/2012 (Business Recorder) - Malaysian palm oil futures jumped to their highest in more than a year on Monday after a US government report showed farmers would plant less soybeans, setting the stage for tighter edible oil supply this year at a time of strong global demand.

The US Department of Agriculture said farmers would plant 2 percent less of the soybean crop than expected, sending soybean prices to a six-month high on Friday and now helping palm oil to cross 3,500 ringgit for the first time this year.

"This is good news for crude palm oil prices in the near term, as it could lead to a smaller soybean crop, which would mean less soybean oil," Kuala Lumpur-based CIMB Investment Bank analyst Ivy Ng said in a note to clients.

"This may spark a price rally for crude palm oil in the second quarter and reinforces our trading buy call on the sector."

Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange climbed 2.9 percent to close at 3,532 ringgit ($1,157) per tonne.

Prices went as high as 3,541 ringgit, a level unseen since March 9 last year.

Traded volumes stood at around 24,650 lots of 25 tonnes each, slightly lower than the usual 25,000 lots, as some dealers remained cautious.

Yet traders and analysts expect palm oil prices to get a further boost from the drought in soy-exporting South America, which has withered crops.

"We think global soybean supply will still be very tight this year, given steady deterioration of the soybean crops in South America, especially Brazil, due to drought," said Alan Lim, an analyst at Kenanga Investment Bank.

Malaysian palm oil is expected to hover around a resistance at 3,528 ringgit per tonne before surging further to 3,590 ringgit, as indicated by technical analysis, Reuters market analyst Wang Tao said.

Export demand for palm oil has been picking up in Malaysia after four straight months of declines.

March palm oil exports rose 4.8 percent, according to cargo surveyor Intertek Testing Services.

In other vegetable oil markets, the most active US soyoil contract for May gained 0.7 percent in Asian trade, supported by the bullish USDA report.

The most active September 2012 soyoil contract on China's Dalian Commodity exchange was trading down 1.0 percent.