RTRS- High soyoil prices to spur demand for palm oil

AMSTERDAM, July 16 (Reuters) - A sharp increase in soyoil prices will spur demand for cheaper palm oil in Europe, lifting prices, but any deepening of the euro zone debt crisis could cap gains, traders said.


Soyoil prices on the European vegetable oil market rose 15 percent over the past month to 1,055 euros a tonne on Monday from 916 euros a tonne on June 16.

In the same period crude palm oil prices rose 7 percent to $1,037 a tonne from $967.

"The spread with soybean oil is getting bigger and that could be the demand driver (for palm oil), but the economic downturn in Europe could pressure down prices," one trader said.

"If the crisis deepens, people could panic and pull out of the market, going to safe havens such as gold."

"It is a very difficult market these days," another trader said.

The Dutch Board for Margarine Fats and Oils said in February it saw p alm oil d emand i n the European Union f lat this year as the main consumers - the food-processing industry and biodiesel producers - faced difficulties including higher raw material costs and a fall in demand due to economic crisis.(nL5E8D75VT)

Soybean futures on the Chicago Board of Trade reached new highs on Monday as the worst drought since 1988 hit key growing areas in the United States, the world's top exporter. GRA/

Unfavourable weather in the Black Sea region, one of the world's top exporters, supported prices of all grains and oilseeds as well.

Higher prices of oilseeds, including soybean and rapeseed, lifted prices of palm oil, but at a slower pace as production is forecast to rise this year.

"We expect this will encourage increased end-user demand (for palm oil) as the prospect for oilseed production in the U.S. and India has declined due to adverse weather," Rabobank said in a research note.

"We maintain our view that vegetable oil prices will maintain their historically low valuation relative to meal in the short term, but will remain bullish across the entire oilseed complex on the deteriorating supply outlook."