23/02/2011 (Bloomberg) - Palm oil gained for the first time in six days as prices of soyabeans and crude oil rallied, while ECM Libra Capital Sdn. forecast an increase in production.

The May-delivery contract rose 0.4 percent to close at 3,669 ringgit ($1,203) a metric ton on the Malaysia Derivatives Exchange. Futures earlier fluctuated, increasing as much as 1.3 percent and dropping as much as 0.5 percent.

Soyabeans gained after dropping for two straight weeks on rising demand for U.S. crops to feed livestock, produce fuel and supply export markets. Crude advanced to the highest level in more than two years as violence escalated in Libya, stoking concern that oil supplies may disrupted. Palm and soyabean oils are substitutes in food and fuel uses, and shifts in crude costs can influence their prices.

Soyabean prices “cannot fall over long periods of time,” said Arhnue Tan, an analyst at ECM Libra. “At some point, people will want to come in and make a punt on it.” “Crude may have a tendency to affect other commodities in the short term.”

Libya is the eighth-largest oil producer among those with quotas in the Organization of Petroleum Exporting Countries and has Africa’s largest crude reserves.

Palm oil has rallied 39 percent in the past year as a La Nina weather event brought heavy rain to Indonesia and Malaysia, the top producers, depleting stockpiles as output dropped amid rising global demand for cooking oils. Futures climbed to a 35- month high of 3,967 ringgit on Feb. 10.

Palm oil output may recover this year as effects of the La Nina event taper off, Bernard Ching, an analyst with ECM Libra, wrote in a report today. The brokerage downgraded the Malaysian plantation sector to “neutral” from “overweight.”

‘Water-Loving Plant’
“Most La Nina spikes are typically followed by a spike in production,” he said. “The palm tree is a water-loving plant and a La Nina, with its heavy rain, would leave estates with favorable moisture content in the soil.”

Crude palm oil may average 2,700 ringgit this year, Ching said. “While 2,700 ringgit average may sound drastic to many given last week’s close of 3,628 ringgit, we view it as still reasonable as crude palm oil prices are inherently volatile.”

May-delivery soyabeans gained as much as 1.2 percent to $13.975 per bushel in Chicago and traded at $13.885 at 6:10 p.m. Singapore time. Soyabean oil rose as much as 2.5 percent to 58.56 cents per pound and traded at 57.70 cents at 6:10 p.m.

September-delivery palm oil on the Dalian Commodity Exchange gained 0.9 percent to close at 9,732 yuan ($1,480) a ton. Soyabean oil for delivery in the same month rose 1 percent to 10,464 yuan a ton at the close.

CME Group Inc.’s most-active June palm-oil contract, pegged to the Malaysian benchmark price, lost 3.3 percent to $1,192.50 at 4:59 p.m. in Singapore.