03/03/2010 (Bloomberg) - Palm oil gained on speculation that demand will increase as the global economy recovers and output growth may be curbed as El Nino parches plantations.

The May-delivery contract advanced as much as 1 percent to 2,639 ringgit ($782) a metric ton on the Malaysia Derivatives Exchange before closing at 2,635 ringgit.

Australia’s economy grew 0.9 percent last quarter compared with the previous three months, the Bureau of Statistics said today. That’s the fastest expansion in almost two years. Japan’s wages rose 0.1 percent from a year earlier, the first gain in 20 months, the Labor Ministry said.

Investors are “playing the recovery story,” said Carey Wong, an analyst at OCBC Investment Research Pte. Forecasts by plantation companies in Indonesia and Malaysia indicate that “output growth may not be as strong as what people were expecting” because of the El Nino weather pattern, Wong said.

Indonesia and Malaysia account for about 87 percent of global palm oil output. El Nino typically produces drier-than- usual weather across parts of Asia, damaging crops.

Exports of the tropical oil from Indonesia, the world’s largest producer, declined 15 percent to 1.2 million tons in January from a month earlier due to low production and demand, according to the Indonesian Palm Oil Association.

Shipments from Indonesia may pick up in the second quarter as palm oil enters the high seasonal output period, said Joko Supriyono, secretary general of Gapki in an e-mailed statement.

In the physical market in Indonesia, 9,000 tons of palm oil sold in auctions, with delivery from Dumai and Belawan ports on Sumatra island, fetched 7,695 rupiah to 7,702 rupiah a kilogram, compared with 7,640 rupiah yesterday.

Palm oil may average 2,100 ringgit to 2,300 ringgit a ton in the second half of the year as “massive” crops of rival soybeans from South America enter the market, Scott Briggs, a agricultural commodity strategist at the Australia & New Zealand Banking Group Ltd. said by phone today.