Palm oil recovered from the biggest decline in two weeks on concern that deteriorating soybean crop conditions in the U.S. may boost the demand for the tropical commodity used in food and biofuels.

The October-delivery contract climbed as much as 0.8 percent to 3,124 ringgit ($1,057) per metric ton on the Malaysia Derivatives Exchange, and was trading at 3,118 ringgit at 4:51 p.m. in Kuala Lumpur. The most-active contract fell 1.3 percent yesterday, the biggest drop at the close since July 12.

The gain in palm oil “is most likely due to the soybean market, where supplies are being threatened by poor weather,” Arhnue Tan, an associate director at ECM Libra Capital Sdn., said by phone from Kuala Lumpur. Palm oil and soybean oil are substitutes in food and fuel uses.

An estimated 62 percent of the soybean crop in the U.S., the world’s biggest exporter, was in good or excellent condition as of July 24, compared with 64 percent a week earlier and 67 percent a year earlier, the U.S. Department of Agriculture said yesterday.

“A marginal rise in exports, and expectations of a mild drop in production over the next two months underpinned sentiment,” Gnanasekar Thiagarajan, a director at Mumbai-based Commtrendz Risk Management Services Pvt., said in a report today.

Output in Malaysia and Indonesia usually declines in the Muslim fasting month of Ramadan, which starts in August this year, as plantation workers head home, he said.

Malaysian exports gained 2.3 percent to 1.28 million tons in the first 25 days of July from the same period in June, surveyor Intertek said yesterday. Shipments rose 1.9 percent to 1.29 million tons, Societe Generale de Surveillance said.

Soybeans for delivery in November advanced as much as 0.8 percent to $13.83 per bushel in Chicago. Soybean oil for December delivery was up 0.5 percent at 57.26 cents per pound.

Palm oil for May delivery climbed 0.8 percent to 9,172 yuan ($1,424) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month increased 0.7 percent to 10,268 yuan a ton.