VEGOILS-Palm ends higher on weaker ringgit, but supply fears drag

Reuters

(Updates lead and prices)

* Price falls to lowest since Aug. 14 in early trade

* Palm oil under pressure from forecasts of surging supplies

-trader

* Palm oil futures could fall in next 4 mths to 2,000

ringgit -analysts

* Rising demand of palm for biodiesel could limit downside

By Anuradha Raghu

KUALA LUMPUR, Sept 23 (Reuters) - Malaysian palm oil futures

ended higher on Monday as the ringgit weakened, after falling

earlier in the day to their lowest in more than a month on

predictions that rising output of the tropical oil could drag

prices to new lows in early 2014.

Industry officials at the Globoil Conference in India had

warned that crude palm oil prices are poised to slip in the next

four months to as low as 2,000 ringgit, as output peaks in the

top two producers Indonesia and Malaysia.

"They're talking about supply coming in, that's why the

market is under tremendous pressure," said a trader with a

foreign commodities brokerage in Kuala Lumpur.

"In the last quarter of the year, production will rise,

exports will stay the same, and end-stocks will go up," the

trader added. "The only minor support is the weakness of the

ringgit.

By Monday's close, the benchmark December contract

on the Bursa Malaysia Derivatives Exchange had edged up 0.4

percent to 2,309 ringgit ($721) per tonne. Prices in early trade

dipped to 2,279 ringgit, the lowest since Aug. 14.

The Malaysian currency fell more than 1 percent

against the U.S. dollar on Monday, improving margins for

overseas buyers and stoking demand for the ringgit-priced

feedstock.

Total traded volumes stood at 29,253 lots of 25 tonnes each,

slightly below the average 35,000 lots.

Despite the forecasts of surging vegetable oil supplies in

the coming months, rising demand of palm oil for blending into

biodiesel could help curb losses and perhaps even lift prices

once stocks start thinning in early 2014.

Indonesian officials also expect the country's local

consumption of the oil to rise following a government move to

increase palm oil use in diesel to 10 percent from 7.5 percent.

Malaysia plans make the same 10 percent requirement in its

biodiesel policies, a government official said late August.

Export taxes also reinforce the appeal of turning crude palm

oil into biofuel for local use, according to James Fry, chairman

of commodities consultancy LMC International at the Globoil

conference on Saturday.

Indonesia will retain its export tax for crude palm oil at 9

percent for October. Malaysia, the No.2 producer, has decided to

keep its export duty at 4.5 percent, unchanged since March.

In other markets, crude oil rose slightly to hold above $109

a barrel on Monday as upbeat business surveys in China and

Europe pointed to stronger oil demand while a possible thaw in

U.S.-Iran relations underpinned easing supply concerns.

In vegetable oil markets, the U.S. soyoil contract for

December eased 0.2 percent in late Asian trade.

The most-active January soybean oil contract on the

Dalian Commodities Exchange fell 0.7 percent upon resuming trade

on Monday, after being closed from for the mid-autumn festival.

Palm, soy and crude oil prices at 1005 GMT

Contract Month Last Change Low High Volume

MY PALM OIL OCT3 2314 +9.00 2288 2314 206

MY PALM OIL NOV3 2311 +11.00 2281 2314 3825

MY PALM OIL DEC3 2309 +9.00 2279 2315 14839

CHINA PALM OLEIN JAN4 5364 -52.00 5310 5378 244514

CHINA SOYOIL JAN4 7038 -48.00 6988 7052 441694

CBOT SOY OIL DEC3 42.28 -0.06 41.96 42.38 10576

NYMEX CRUDE NOV3 104.99 +0.24 104.10 105.12 22164

Palm oil prices in Malaysian ringgit per tonne

CBOT soy oil in U.S. cents per pound

Dalian soy oil and RBD palm olein in Chinese yuan per tonne

Crude in U.S. dollars per barrel

($1 = 3.202 Malaysian ringgit)

(Editing by Tom Hogue and Muralikumar Anantharaman)

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