Palm Oil Rebounds in Malaysia, Tracking Gain in Soybean Futures

June 23 (Bloomberg) -- Palm oil futures rebounded, paring their biggest drop in more than five months yesterday, as soybean prices climbed and investors deemed four days of declines as excessive.

Soybean oil is a substitute for palm oil, and changes in the price can influence trends in the tropical commodity. Chicago soybeans had rebounded from “pretty severe losses,” according to Doug Whitehead, an agricultural commodity strategist at Australia and New Zealand Banking Group Ltd.

Palm oil for September rose as much as 2.6 percent to 2,212 ringgit ($623) a metric ton on the Malaysia Derivatives Exchange, and traded at 2,204 ringgit at 11:40 a.m. The price dropped 5.6 percent yesterday, taking losses over four days to 10 percent.

Looking at “crude oil prices, there’s fair bit of resistance at $70 that could also provide a cap for crude palm oil prices,” Carey Wong, a plantation analyst at OCBC Investment Research Pte., said today by telephone. “The other component is soybean prices.”

The most-active soybean futures contract in Chicago gained as much as 1.1 percent to $9.9175 a bushel, the first gain in four days. That lifted Chicago soybean oil for December delivery by 0.5 percent to 36.91 cents a pound at 11:40 a.m.

Palm oil can also track crude oil because vegetable oils can be used in biofuels. Prices may be volatile as “we don’t think crude going to $70 and above is justified based on economic fundamentals,” OCBC’s Wong said. “The market is reassessing.” New York crude traded at $66.76 a barrel today.

Given the outlook for crude oil and soybeans, “we’re pretty comfortable for the average price between $500 and $550” a ton for palm oil, Wong said. Palm oil has averaged $611 this year, according to Bloomberg data.

Palm oil for January delivery fell 1.8 percent to 5,986 yuan ($875) a ton on the Dalian Commodity Exchange in China, the world’s biggest user, at the 11:30 a.m. trading break.