In The News - 09/06/2005

KUALA LUMPUR, June 8 (Reuters) - Malaysian crude palm oil futures ended off their lows on Wednesday as mild short-covering surfaced in a market which doggedly tracked every move in rival U.S. soyoil.

But trade volumes were thin, and prices remained below 1,400 ringgit a tonne, as investors decided to wait out latest supply and demand data due over the next two days before committing.  The government-run Malaysian Palm Oil Board will issue on Friday official production and export numbers for May, as well as carry-forward stocks to June.

Two independent surveyors of Malaysian oil palm cargoes, Intertek Testing Services and Societe Generale de Surveillance, will release on the same day export estimates for June 1 to 10 -- giving an idea of preliminary demand for the month.

"There are just two more days for all these numbers, so understandably some people are holding back from committing," said a trader.

The benchmark third-month crude palm oil on Bursa Malaysia Derivatives, August, settled up just 1 ringgit at 1,390 ringgit ($365.79) a tonne after being in negative territory most of the day.

The contract had closed above the psychologically-important level of 1,400 ringgit on Monday for the first time in a week. But it broke that support in Tuesday's early session itself.

Wednesday's low was 1,384 ringgit while the high was 1,394.

Soyoil futures on the Chicago Board of Trade rebounded in Wednesday's electronic trade, with July delivery up 0.10 cent by 0900 GMT after falling by that much in earlier business.

Trade in Malaysian palm oil futures has been lethargic for weeks as investors worry that demand could dip from June, leading to a build-up in stocks that weigh on prices.

Production is estimated to have grown only 3 percent last month, against a 20 percent jump in exports.

But June output could be up to 5 percent higher, while exports could slow by 10 percent, speculate dealers. 

Persistent market talk that Malaysia may adjust upwards the value of the ringgit -- from the present fixed rate of 3.8 to the dollar -- is also weighing on investors' minds. A higher ringgit will make palm oil, sold in dollars, more expensive. Malaysia is the world's largest

Soybean futures at the Chicago Board of Trade fell on Wednesday as traders took some of the weather premium out of the market as forecasters continued to call for rain in the parched eastern U.S. Midwest, traders said.

"The biggest issue is the west is in good shape and the perception of good rains coming in the east," said one CBOT soy broker.

Rains were expected to move across the dry areas of the eastern U.S. Midwest. Illinois and Indiana are parched but crop weather remains generally good through the western Midwest.

"One concern right now is the dryness in Illinois and Indiana, and there is a potential for improvement during the next five to seven days or so," said Meteorlogix forecaster Joel Burgio.

"Another area of concern no one is talking about much is the wetness in South Dakota, North Dakota and Minnesota," Burgio said. "The wet conditions are slowing planting of soybeans."

July soybeans closed 7-1/4 cents per bushel lower at $6.67-1/2. The deferreds were also weaker, with new-crop  November down 7-1/2 at $6.78, but closing at a 10-1/2 cent premium to old-crop July.

Part of that premium was the uncertainty about possible yield damage from the spread of Asian soy rust this summer.

The U.S. Agriculture Department said late Tuesday Asian soy rust is likely to spread to Alabama and South Carolina by mid-June. So far this year, the devastating fungus has been confirmed on kudzu in Florida and Georgia.

Firms continued to roll out of their July positions before the start of the delivery period. Funds were bear-spreading and commercials were on the other side. There was also some evening of positions before USDA's June crop reports on Friday.

An average of analysts' estimates pegged 2004/05 U.S. soy ending stocks at 330 million bushels, down 25 million from last month's forecast. Few changes were expected in the government's U.S. 2005/06 soy end stocks, with the average of analysts' estimates at 285 million, down 5 million from May.

U.S. Midwest cash basis bids for soybeans were mostly steady early Wednesday.

The South American July soybean contract closed 3 cents lower at $6.67 per bushel in thin trade.

The soymeal market was under pressure amid weakening cash markets around the world. This week's climb to a one-year high in Chicago Board of Trade futures prices was deterring end users from buying meal for feed rations.

"Meal is being replaced by everything -- rapeseed, sunseed, field peas because of the prices -- we're not competitive," the CBOT soy broker added.

This week's strength in U.S. meal prices was also resurrecting talk of possible soymeal imports into the United States soon, traders said.

July soymeal closed $3.10 lower at $211.10 per ton, while the deferreds were $1 to $2.80 weaker.

Soyoil followed soybeans lower but oil continued Tuesday's trend of gaining on soymeal as the oil/meal spread was correcting after meal prices ran to a one-year top this week.

July soyoil settled 0.08 cent lower at 22.98 cents per lb., while the deferreds through July 2006 were down 0.07 to 0.14 cent.

Commercials were net buyers of roughly 1,000 soyoil contracts while funds were close to even.

Funds were net sellers of roughly 1,000 to 2,000 each in soybeans and soymeal.

Volume was moderate in soybeans estimated at 77,471 futures and 30,267 options. Soymeal trade was pegged at 28,653 futures and 2,066 options. In soyoil, an estimated 29,708 futures and 865 options traded.

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