22/09/2010 (Bloomberg) - Palm oil climbed on speculation that China and India, the biggest users, may boost imports as adverse weather threatens to damage local oilseed crops, and as a weaker dollar improved the investment appeal of commodities.

December-delivery futures advanced 0.1 percent to 2,673 ringgit a metric ton ($866) on the Malaysia Derivatives Exchange. Trading volumes was sparse as markets in China, South Korea and Taiwan were closed for holidays.

“The weather is playing a crucial role in determining commodity prices, be it palm oil or soybeans,” said Pawan K. Poddar, director at Mumbai-based Poddar’s Agro Trading Co. “Damage to Chinese crop may prompt them to import more and excess rain is damaging the oilseed crop in India.”

Gold, silver and copper gained as a decline in the dollar burnished the appeal of commodities as alternative investments. The greenback extended a drop against a basket of six major counterparts, falling to the lowest level in six weeks, after the Federal Reserve yesterday said it was willing to ease monetary policy further to boost the U.S. economy.

Soybeans jumped to a 15-month high in intraday trading on Sept. 20 as a cold snap threatens crops in China, the biggest user of the oilseed. Freezing weather this week in northeastern China will reduce crop quality and output, after rains delayed planting, according to T-Storm Weather Inc.

The U.S. sold 170,000 tons of soybeans to China scheduled for delivery before Aug. 31, the U.S. Department of Agriculture said yesterday.

India, the biggest vegetable oils buyer after China, may import a record amount of soybean and palm oils for a fourth year because of growing demand for fried foods, Ashok Sethia, president of the Solvent Extractors’ Association of India, said yesterday. Incoming shipments may reach 9.5 million tons in the year starting Nov. 1, from 9 million tons this season, he said.

‘Choppy Trade’

“There’s always uncertainty in the palm oil market ahead of the peak harvests in Indonesia and Malaysia and as the main soybean harvests wind up around the world,” Poddar said. “The trade may remain choppy in the next few sessions.”

December-delivery soybean oil traded in Chicago added as much as 0.8 percent to 43.15 cents a pound. November-delivery soybeans rose as much as 0.7 percent to $10.88 a bushel.

CME Group Inc.’s December-delivery palm oil contract, which is pegged to the Malaysian benchmark, rose as much as 0.7 percent to $869 a ton in Singapore and traded at $868 a ton at 6:12 p.m.

The Dalian Commodity Exchange was closed for holidays.