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[KUALA LUMPUR] Malaysian palm oil futures climbed to their highest in over two months on Wednesday as the ringgit continued its tumble against the US dollar, with prices also buoyed by fears that a fresh wave of monsoon flooding would squeeze supplies.
The Malaysian currency dropped as much as 0.8 per cent to 3.5850 against the greenback, its weakest in 5-1/2 years. A weaker ringgit makes the ringgit-priced feedstock cheaper for foreign investors.
"Palm's plus factors are the ringgit and the weather in the days to come," said a trader with a foreign commodities brokerage in Kuala Lumpur, adding that the weak ringgit could attract key buyers such as China to book more palm this month.
Traders said this buying interest, alongside worries of tighter supply in December and January, had lifted spot month prices to a premium of around RM12-RM16 over the benchmark contract.
The benchmark March contract closed up 2.1 per cent at RM2,331 (US$651) per tonne, after rising as much as RM2,335 in late trade, the highest since Nov 3.
Total traded volume stood at 54,901 lots of 25 tonnes, much higher than the usual average of 35,000 lots.
Worries that another round of monsoon floods in Malaysia would hurt palm oil supply from the world's second-largest producer also underpinned prices, traders said.
Malaysia's meteorological department issued a "yellow stage" warning for more rains over the states of Kelantan, Terengganu and Pahang, and also the top palm-growing states of Johor and Sabah - to drag on until Friday.
Market estimates point to crude palm oil output tumbling 23 per cent in December as rains and floods last month disrupted harvesting and logistics in parts of the country, which may bring end-stocks down to 2.02 million tonnes.
In other markets, Brent crude oil fell below US$50 a barrel for the first time since May 2009 on Wednesday, hammered by a growing supply glut and weak global demand.
In other vegetable oil markets, the US soyoil contract for March reversed losses to rise 0.2 per cent in late trade, while the most active May soybean oil contract on the Dalian Commodity Exchange rose 0.1 per cent.