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 Mahamad Rodzi Abdul Ghani
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 Bloomberg News
 Palm Oil Little Changed After Rising on Alternative Fuel Demand

21/3/07  (Bloomberg) -- Palm oil futures were little changed after rising in the previous two sessions on concern higher demand for vegetable oils for fuel use is cutting into supplies.

Soybean oil traded in Chicago rose a third day to 31.30 cents a pound yesterday, the highest close since May 13, 2004. The contract has gained 27 percent in six months on increased demand for the oil for food and fuel use.

``That has an impact on palm oil,'' said Alvin Tai, an analyst at OSK Research Sdn. in Kuala Lumpur. ``Prices are partly driven by crude oil.''

Palm oil for June delivery, the most active contract, rose 1 ringgit or 0.1 percent, to 1,978 ringgit ($569) a metric ton on the Malaysia Derivatives Exchange in Kuala Lumpur at 3:29 p.m.

Crude oil prices rose for five years between 2002 and 2006, tripling in the period, sparking the use of oils and alcohols from wheat, corn, sugar, rapeseed oil, soybean and palm oil for use in fuels. Soybean oil and palm oil are the world's most consumed vegetable oils.

Competition for limited arable land to plant crops that can be used to produce oils for fuels is hurting supplies of oils for food, driving prices higher, said Thomas Mielke, chief editor of trade publication Oil World on March 14.

He forecasts palm oil futures rising as high as 2,250 ringgit a ton in the second half. Soybeans are losing out in acreage to wheat and corn, which can be turned into bio-ethanol for fuel use, he said.

Malaysian palm oil futures have gained 29 percent in the past six months. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Malaysia and Indonesia produce 85 percent of the world's palm oil.

Malaysian Palm Oil Board ( MPOB ) Lot 6, SS6, Jalan Perbandaran, 47301 Kelana Jaya, Selangor Darul Ehsan, MALAYSIA.
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