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Palm oil gains set for longest run

KUALA LUMPUR: (Bloomberg) Palm oil climbed for a ninth day to head for the longest run of gains in more than a decade as flooding in Malaysia hurt prospects for harvesting, compounding a seasonal slowdown in production in the largest grower after Indonesia.

The contract for March delivery rose as high as RM2,305 a tonne yesterday on Bursa Malaysia Derivatives.

A ninth day of rising prices would be the longest run since June 2002, according to data compiled by Bloomberg. Palm oil climbed to RM2,308 a tonne two days ago, the highest level since November 4.

Heavy rain that flooded parts of Malaysia over the past two weeks would continue for at least another week, risking disruption to oil palm fruit harvest, Commodity Weather Group forecasted. The constant downpour is also disrupting rubber supplies from Thailand and this had boosted prices.

“Key growing areas are inundated,” said Phillip Futures Sdn Bhd derivatives specialist David Ng. “Delayed harvesting activities and seasonally lower production will hamper yield levels in coming weeks.”

Output in Malaysia typically drops in the fourth quarter and the initial months of the year, usually bottoming in February.

Production might contract 11 per cent in December, in line with seasonal patterns, while reserves might fall four per cent, said Kenanga Investment Bank Bhd analyst Alan Lim in a report yesterday. Declining inventory should support prices as it reflected stable demand against lower supply, he said.

The current flood-induced rally puts palm oil futures on course for 2015’s first quarterly advance. Prices climbed 3.7 per cent since the end of September, thus moderating this year’s average price decline to only 13 per cent when compared with that of 2013. 

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