KUALA LUMPUR: A fresh spike in cooking oil prices is increasing concerns that global food costs are heading for a record as drought curbs production in South America, a labour shortage stymies output in Malaysia, and Indonesia limits exports to safeguard domestic supplies.
Palm oil, the world’s most consumed cooking oil, climbed to yet another intraday record in Kuala Lumpur on Monday, buoyed by shipment restrictions in top grower Indonesia and a chronic worker shortage in Malaysia’s plantations.
Soybean oil traded near the highest since June, while soybeans, from which the oil is derived, jumped to the strongest since May. Heat and drought have led to repeated reductions in estimates for soybean crops in top grower Brazil and in Argentina.
That may well be reflected in lower predictions for global supplies in the monthly report from the US Department of Agriculture on Wednesday.
Global food costs climbed nearer to a record in January, according to the latest data from the United Nations, because of more expensive vegetable oils and dairy.
The most recent increase in cooking oil prices could push the monthly food index to a record when it is published again in early March. Rising fertilizer costs because of higher energy markets may also bolster food prices.
The rally on Monday followed the return of Chinese investors after a week-long Lunar New Year holiday. Soybean meal futures in Dalian climbed by the daily limit, while palm oil prices jumped to the highest since 2008.
In US markets, money managers increased their net bullish bets on soybeans to the biggest in eight months in the week ended Feb 1, and on soybean oil to a 10-week high.
The cost of soybeans in Brazil jumped over the past month as forecasts for the current harvest were slashed due to excessive heat and drought.