Malaysian palm oil futures soared more than 6% on Friday as dry weather curbed prospects of palm and U.S soybean production, setting the contract up for a sharp weekly jump.
For the week, palm has risen 10.5% so far.
Palm oil estates in Sabah, Malaysia’s largest producing state of the commodity, are experiencing water stress from early signs of El Nino, cutting yields and exacerbating the impact of under-fertilising and labour shortages seen over the past three years.
A stretch of dry weather following planting season has stressed crops across the U.S. Midwest, raising concerns that the forecasted record corn and soybean harvest will fall below expectations.
Exports of Malaysian palm oil products for June 1-15 fell 16.6% from the same week in May, cargo surveyor Intertek Testing Services said. Another cargo surveyor AmSpec Agri Malaysia said exports fell 16.4%.
Dalian’s most-active soyoil contract DBYcv1 jumped 4.5%, while its palm oil contract DCPcv1 gained 5.4%. Soyoil prices on the Chicago Board of Trade BOcv1 rose 1.1% following a 4.4% overnight surge.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.