Rubber enters bull market as palm oil near 8-week high

Rubber entered a bull market and palm oil closed near an eight-week high as flooding across Malaysia and parts of Thailand hurt supplies of both commodities and forecasters predicted more rain.

Rubber for June delivery rallied 3.8 percent to 213.3 yen a kilogram ($1,773 a metric ton) on the Tokyo Commodity Exchange, the highest settlement since July 3. Futures rose 22 percent from a five-year low in October, meeting the threshold for a bull market with a gain of at least 20 percent. Palm oil fell 0.1 percent.

Heavy rains flooded parts of Malaysia and southern Thailand over the past two weeks, and Commodity Weather Group predicted the falls will continue for at least another week.

Thailand is the world’s largest rubber exporter and neighbour Malaysia is the biggest shipper of palm oil after Indonesia, where some rubber exporters are in talks with buyers to reschedule shipments because of rains.

“Key growing areas are inundated,” said David Ng, a Kuala Lumpur-based derivatives specialist at Phillip Futures Sdn., referring to palm-growing estates in Malaysia. “Delayed harvesting activities and seasonally lower production will hamper yield levels in coming weeks.”

Palm oil for March delivery dropped to 2,284 ringgit ($653) a metric ton on Bursa Malaysia Derivatives after closing Monday at the highest since November 4.

Some Indonesian rubber exporters are in talks with buyers to reschedule shipments, Rusdan Dalimunthe, executive director of the Rubber Association of Indonesia, or Gapkindo, said in a interview from Jakarta. Rubber production may drop 30 percent because of rain and floods, Dalimunthe said.

Rubber supplies in Thailand and Malaysia will contract by at least 100,000 tons a month if floods persist, International Rubber Consortium CEO Yium Tavarolit said. The group is the operating arm of the International Tripartite Rubber Council, which represents governments and exporters from Thailand, Indonesia and Malaysia.

Rubber futures rose 16 percent this quarter, the first advance since 2013, after Thailand, Indonesia and Malaysia took steps to shore up prices from the five-year low in October.

Producer groups from the top suppliers pledged to refrain from selling below $1.50 a kilogram. Three nations also agreed to cut exports from next year to drain supplies.