25/02/2011 (Bloomberg) - Palm oil rebounded from its lowest level in three months after Malaysia, the world’s second-biggest producer, predicted “strong demand” and higher prices for the vegetable oil this year.

The May-delivery contract advanced as much as 1.2 percent to 3,496 ringgit ($1,146) a metric ton today on the Malaysia Derivatives Exchange, before ending the morning session at 3,480 ringgit. Futures yesterday fell to their lowest closing price since Nov. 30 and are set for the second weekly decline.

Palm oil prices may average 3,652.50 ringgit this year amid “strong demand,” researchers Ramli Abdullah and Ayat K. Rahman at the Malaysian Palm Oil Board said in a report to be presented at an event in Kuala Lumpur later today. The commodity averaged 2,715 ringgit in 2010, according to Bloomberg data.

Demand for food is growing, Malaysian Plantation Industries and Commodities Minister Bernard Dompok, said today. “I do expect the price for this year to be on the upper side of 3,000 ringgit, we hope,” he told reporters.

Still, Malaysia’s palm oil exports declined 8.2 percent in the first 25 days of February to 973,441 tons from a month ago, independent market surveyor Intertek said today.

“Demand for palm oil may stay subdued in the near term as buyers like India have ample domestic supplies,” said Prasoon Mathur, an analyst at Religare Commodities Ltd. in New Delhi. “Soybean harvests in Brazil and Argentina will put more pressure on palm oil prices.”

Oilseeds, corn, wheat and cotton have slumped this week on speculation that the unrest in Libya and the Middle East may continue, reducing demand for commodities. Palm has slumped 5.5 percent this week.

Output Rebound

Malaysia’s output may be 17.6 million tons, compared with 17 million in 2010, Yusof Basiron, chief executive officer of the Malaysian Palm Oil Council, said in an interview Feb. 23. That would equal 2009’s production, data from the board show.

May-delivery soybeans gained 0.2 percent to $13.3175 a bushel at 12:55 p.m. Singapore time on the Chicago Board of Trade. Soybean oil climbed as much as 0.9 percent to 55.77 cents per pound in Chicago and traded at 55.74 cents.

September-delivery palm oil on the Dalian Commodity Exchange jumped as much as 1.6 percent to 9,324 yuan ($1,418) a ton. Soybean oil for delivery in the same month climbed as much as 1.5 percent to 10,030 yuan a ton.

CME Group Inc.’s most-active June palm-oil contract, pegged to the Malaysian benchmark price, advanced as much as 0.7 percent to $1,129.25 a ton at 12:56 p.m. in Singapore.