15/08/2011 (Bloomberg) - Palm oil advanced for a third day as demand for the tropical oil, used in food and biofuels, was seen rising amid tightening supply of competing vegetable oils.

October-delivery palm oil gained as much as 1.1 percent to 3,025 ringgit ($1,008) a metric ton on the Malaysia Derivatives Exchange and closed at 3,015 ringgit a ton in Kuala Lumpur. The most-active contract fell for a third week, losing 1.2 percent.

India, the world’s largest palm oil buyer, may boost imports to a record, gaining 10 percent to about 7 million tons in the year ending Oct. 31 from a year ago, as rising incomes boost demand for processed food, according to a Bloomberg News survey of five processors and analysts.

“If their local crop is having some problems, they would need to import more,” driving prices higher, Donny Khor, a senior vice president for futures and options at OSK Investment Bank Bhd., said by phone from Kuala Lumpur today.

The area of monsoon-sown peanut in India may decline 10 percent from 4.98 million hectares last year, as farmers switched to planting cotton after prices of the fiber surged to a record, according to GG Patel & Nikhil Research Co.

That may push the nation’s imports because peanut produces more oil than soybeans, said B.V. Mehta, executive director of the Solvent Extractors’ Association of India.

Stockpiles Drop
Strong demand in emerging markets and the growing popularity of palm oil in developed countries, as well as the limited supply of other vegetable oils will keep the market “resilient,” Golden Agri-Resources Ltd., the world’s largest oil palm planter, said in a statement yesterday.

Stockpiles of palm oil in Malaysia, the world’s second- largest producer, dropped to 2 million tons in July from 2.05 million tons in June, the Malaysian Palm Oil Board said on Aug. 10. That was lower than the median estimate of 2.07 million tons in a Bloomberg survey of three analysts and two plantation companies. Output slipped 0.1 percent to 1.75 million tons, while exports rose 9.1 percent to a record 1.73 million tons, the board said.

Soybeans for delivery in November gained as much as 0.8 percent to $13.42 per bushel in Chicago, before trading little changed at $13.3125 at 6:14 p.m. Singapore time. Soybean oil for December delivery climbed as much as 0.8 percent to 55.02 cents per pound.

Palm oil for May delivery added 0.1 percent to 8,774 yuan ($1,372) a ton on the Dalian Commodity Exchange and soybean oil for delivery in the same month ended little changed 9,968 yuan a ton.