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DJ. Crude palm oil futures on Malaysia's derivatives exchange soared Wednesday, boosted by a tighter supply outlook for vegetable oil markets amid strong demand.

The benchmark November contract at Bursa Malaysia Derivatives ended 3.9% higher at 3,078 ringgit a metric ton, the highest settlement for the benchmark since July 16.

The closely watched Pro Farmer Crop Tour in the U.S. Midwest kicked off this Monday. Soybean pod counts have declined in the U.S. states of Nebraska and Indiana, reflecting damage from a devastating drought across the Midwest, scouts from the Tour found.

"The tighter supply outlook is causing some panic," said a Singapore-based trader, noting that supplies are limited as the South American soybean harvest will begin only next year.

Despite rising prices, demand for vegetable oils remains strong and prices may still need to go higher to ration demand, a Kuala Lumpur-based trader said.

The U.S. Midwest drought, which began around early June, prompted soybean crushers to book shipments, resulting in total July imports of 5.87 million tons--the highest level in two years--and increases of 10% on year and 4% on month, China customs data showed earlier this month.

Demand for palm oil is also robust. Malaysia's palm oil exports during Aug. 1-20 rose 6% from the same period a month earlier to 809,814 tons, cargo surveyor Intertek Agri Services said Wednesday.

A possible El Nino weather phenomenon could also lift prices across the commodity complex, including palm oil, traders said. A developing El Nino weather event is usually associated with limited rainfall and hot, dry weather in Southeast Asia.

Besides tracking weather conditions in the U.S. and Asia, investors will also be watching out for Aug. 1-20 shipment data from surveyor SGS (Malaysia) Bhd. scheduled for release on Aug. 27, a second Kuala Lumpur-based trader said, tipping prices to test the MYR3,100/ton level Thursday.

In the cash market, refined palm olein for September was offered $40 higher at $1,000/ton, while cash CPO for prompt shipment was offered MYR10 higher at MYR3,000/ton compared with Friday.

Open interest on the BMD was 147,369 lots, versus 114,968 lots Friday. One lot is equivalent to 25 tons.

A total of 41,150 lots of CPO were traded versus 32,367 lots Friday.

Malaysian markets were closed Monday and Tuesday to mark the Muslim Id al-Fitr holiday.

Ending BMD CPO futures prices in MYR/ton: 
Month   Close  Previous  Change   High    Low 
Sep'12  3,008     2,898    +110  3,008  2,935 
Oct'12  3,048     2,928    +120  3,048  2,982 
Nov'12  3,078     2,962    +116  3,078  3,010 
Dec'12  3,090     2,985    +105  3,090  3,037 
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