Soybean oil climbs to highest in 23 years

Soybean-oil futures rose to the highest since June 1984 on speculation that reduced global production of oilseeds and rising demand to make alternative fuels will reduce world reserves of vegetable oil. US farmers plan to cut soybean acreage to the smallest since 1996.

Palm-oil inventories in Malaysia dropped 12 percent to the lowest since May 2004, the Malaysian Palm Oil Board said last week. Brazil's Cia. Vale do Rio Doce, the world's largest iron-ore producer, plans to convert its railway locomotives to run 20 per cent on biodiesel made from soybeans.

"It's a bull market in vegetable oils as world demand for biofuels is rising,'' said Anne Frick, senior oilseed analyst for Prudential Financial Inc. in New York. "The global supply of vegetable oils is falling'' while fuel and food demand is rising, Frick said.

In other markets, wheat fell to the lowest in more than a month as U.S. farmers prepare to harvest 24 percent more winter wheat than last year. Sugar declined. The UBS Bloomberg Constant Maturity Commodity Index dropped 2.04 to 1103.84. Soybean-oil futures for July delivery climbed 0.16 cent, or 0.5 percent, to 35.15 cents a pound on the Chicago Board of Trade.

The price rose 2.2 percent this week. Futures have risen 37 percent in the past year. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

The winter-wheat harvest will climb to 1.62 billion bushels from 1.3 billion a year earlier, the U.S. Department of Agriculture said last week. Farmers planted 8.7 percent more of the grain in October and November after prices reached the highest in 10 years because of drought. Futures tend to fall before the harvest.

"Harvest is just around the corner,'' said Louise Gartner, owner of Spectrum Commodities in Beavercreek, Ohio. "It's supposed to be starting on May 20 in the southern U.S. and a few days later in the Midwest."

Wheat futures for July delivery fell 14.25 cents, or 2.9 percent, to $4.7125 a bushel in Chicago, the lowest since April 11. The price still gained 4.4 percent this week. Wheat in Chicago has dropped 15 percent from a 10-year high of $5.57 in October after droughts in several countries, including the US and Australia, cut global production.

Sugar had the biggest weekly decline since December on concern that a global surplus will widen as demand fails to keep pace with rising supply from India and Brazil, the world's largest producers.

Global output will exceed demand by as much as 9.2 million metric tons in the year ending Sept. 30, according to the International Sugar Organization in London.