KUALA LUMPUR (April 08 2003) : Palm oil futures surged in Monday's latetrade to close sharply higher, fuelled by talk of Malaysia's participationin Iraq's food-for-oil programme.

The rally could hold indefinitely as players try to figure out how palmoil could benefit in a whole range of emergency supplies scheduled to landin Iraq by May 12, dealers said.

"I think people will remain excited about this for a while," said anexport manager at a local commodities brokerage which ships oilpredominantly to the Middle East.

Palm oil's benchmark June futures ended 28 ringgit up at 1,480 ( $389.47)per tonne after posting a gain of only four ringgit in the morning.

Final volume was a heavy 6,729 lots.

Dealers said the market began reacting late in the afternoon to a Reutersstory over the weekend that the United Nations had asked edible oilsuppliers, including those in Malaysia, to send more than 500,000 tonnesto Iraq over the next few weeks.

A list of the UN's food-for-oil programme, made available to Reuters onMonday, showed 44 approved contracts for vegetable ghee scheduled to landin Iraq within 45 days of a Security Council resolution passed on March28.

Vegetable ghee is made exclusively from palm oil, whose biggest producersare Malaysia and Indonesia.

The tonnage for the 44 contracts was not immediately known.

But traders told Reuters on Sunday that 450,000 tonnes of palm-basedvegetable ghee and 100,000 tonnes of RBD palm oil were ready to enterIraq, where concerns are growing about potential widespread hunger amongits people as a result of the US-led war launched on March 20.

"That's what's exciting the trade here as people know that amount of oilhas got to come from this side of the world," said a trader in KualaLumpur.

Malaysian palm oil exports have been on riding high lately afterconsolidating in earlier months.

The market's main cargo surveyor, Societe Generale de Surveillance (SGS),estimated an export of 1.0 million tonnes for March, against an officialfigure of 765,543 tonnes for February.

SGS' next data for April 1-10 is due on Thursday.

"We may not see any of the Iraqi demand yet in this week's SGS numbers.But granted, we will see it in coming data," said the Kuala Lumpur trader.

In physical trade of crude palm oil (CPO), contracts for April and Maywere offered by sellers at 1,510 ringgit a tonne -- up 25 ringgit fromFriday -- against bids at 1,500 in both the southern and central regions.

Deals were done at 1,490-1,500 ringgit.

PALM OIL FUTURES:

June (3rd month): 1480 ringgit

Open/High/Low: 1455/1484/1448 ringgit

Previous settlement: 1452 ringgit

PALM OIL PHYSICALS:

April (south): 1510 ringgit

Previous close: 1485 ringgit

PALM OIL FUTURES: Up on euphoria over expected boom in sales under Iraq'soil-for-food programme.

PHYSICALS: Also rallied, following futures.-Reuters