In The News - 03/06/2005

Malaysian crude palm oil futures fell nearly half a percent on Thursday, extending their weakness of the previous day, after the benchmark price of rival soyoil softened in electronic trade.  Talk that few shipments of palm oil were booked for the second half of June, compared with voluminous loadings in the same period of last month, also sparked worries of slacking demand, dealers said.

"There's not much excitement," said a trader. "It's like people are just forcing themselves to do something."

At midday, the benchmark third-month crude palm oil on Bursa Malaysia Derivatives, August <KPOQ5>, was down six ringgit at

1,387 ringgit ($365) a tonne.     Its low for the morning was 1,385 ringgit and the high 1,399. Other traded months were down 5 to 6 ringgit

Volume was 2,498 lots of 25 tonnes each. The market typically sees 3,000 lots or more on a busy morning.  July soyoil on the Chicago Board of Trade was down 0.16 cent at 23.30 cents a pound in Thursday's electronic trade after a rebound the previous day. 

Soy and palm compete for export destinations and their prices often move in step. Dealers said investors were worried that palm oil production

could surge in coming months, overtaking demand. 

The market largely ignored estimates from a cargo surveyor on Tuesday that May shipments of palm oil could grow 18.6 percent over April.

Analysts from five plantation companies surveyed by Reuters last week forecast a median of 1,284,346 tonnes for May output, against the record 1,246,938 tonnes officially seen in April. 

 The state-run Malaysian Palm Oil Board will issue on June 10 official production, exports and closing stock numbers for May. 

Constant speculation that Malaysia will revalue its ringgit -- from the present fixed rate of 3.8 to the dollar -- is also weighing on the market.

Soybean futures at the Chicago Board of Trade fell on Thursday as traders' fears about dryness in the eastern U.S. Midwest eased and sparked long liquidation.

CBOT soybeans closed 9-1/2 to 18-1/4 cents per bushel lower, with new-crop months under the most pressure. Old-crop July soy <SN5> was down 16-3/4 cents at $6.68-1/2 and new-crop November <SX5> was 17-1/4 cents lower at $6.72-1/2 per bushel.

The sell-off came on the heels of the near two-week weather rally in beans, with the July contract up about 45 cents in the past 10 days. Open interest in the July contract grew by 9,336 lots on Tuesday as concerns fueled speculative buying.

"A lot of those people bailed out today -- it's all weather," said Vic Lespinasse, floor broker with A.G. Edwards.

Private forecasters have been calling for rain this weekend and traders had more confidence in the outlooks after overnight rains in southern Illinois and southern Indiana.

Meteorlogix weather service on Thursday said plenty of rainfall is likely over the near term in the western Midwest and the eastern belt should see beneficial rains over the weekend and early next week. Dry areas of Illinois should receive some crop-enhancing rains.

The market was also due for a technical correction after climbing to an 11-week top on Wednesday.

The nine-day relative strength index for the July contract closed at 60 on Thursday, down from Wednesday's 76 -- above the 70 level viewed as technically overbought market.

Export business remained quiet as importers turn to cheaper supplies from South America.

Midwest river basis bids for soybeans were firm on Thursday while basis levels at interior locations were steady, dealers said. Light movement was underpinning cash prices.

South American soybeans settled 16-1/2 cents lower to 8 cents higher, with no trades reported.

The soy-product markets were also lower on spillover pressure from soybeans.

CBOT July soymeal closed $4.70 per ton lower at $210.90, with the deferreds down $4.60 to $5.70. July soyoil <BON5> was down 0.57 cent per lb at 22.93 cents, while the back months were 0.60 to 0.10 lower.

Soymeal and soyoil were poised for a setback after their recent fund-led rally. U.S. soymeal prices were hovering at 11-month highs this week, raising the possibility of U.S. buyers importing South American meal, traders said.

"The cheaper basis in Brazil and Argentina, cheaper freight have combined to make imported meal approximately of the same price as domestic offers," said Roy Huckabay, an analyst with The Linn Group.

Weakness in U.S. cash soymeal markets was also bearish. Processors had ample bean supplies to meet nearby crushing needs, which was pressuring basis offers.

Malaysian palm oil futures closed lower overnight as palm sagged following the drop in rival CBOT soyoil overnight.

Funds were net sellers of roughly 5,000 contracts each of soybeans and soyoil. In soymeal, funds were net buyers of about 3,000 lots. But some of the buying in meal appeared to be linked to offsetting over-the-counter hedge trades.

Volume was moderate in soybeans and on the heavy side in soymeal and soyoil. In soybeans, an estimated 78,767 futures and 31,071 options traded. Soymeal trade was pegged at 35,224 futures and 3,898 options. Soyoil volume was seen at 40,032 futures and 1,720 options.

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