Soybean demand may boost palm oil prices

Palm oil futures in Malaysia may be supported next year as global demand for soybeans is outpacing supply and boosting the price of rival soybean oil, Dorab Mistry, director at Godrej International, said.

Palm oil may rise above 3,000 ringgit ($888) a tonne if soybean oil rallies, Mistry, who has traded vegetable oils since 1976, said in an interview in Guangzhou on Wednesday. Soybean oil is palm oil's main competitor both for cooking and for bio-diesel.

Malaysian palm oil has gained 60 per cent in the past year on rising consumption in China and India, the world's biggest buyers, and on demand for alternative fuels.

The contract for January delivery, which reached a record 3,013 ringgit a tonne on November 9, traded at 2,916 ringgit by the midday break on Wednesday.

Soybean oil sets the price because it has smaller output and there is limited capacity for expansion, yet demand is relatively inelastic, Mistry said.