In The News - 10/06/2005

Malaysian palm oil sank almost 2 percent in a selling spree started by a regional trading group and extended by the market on talk of bearish supply-demand for June.

The benchmark crude palm oil futures contract on Bursa Malaysia Derivatives broke two price support levels, while volume on the exchange was the highest in more than a week.

The rout -- worsened by losses in rival soyoil -- came a day before the Malaysian Palm Oil Board was due to publish official export and production numbers for May, as well as stocks to be carried forward into June.

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

The regional trading group -- with operations in Singapore and Indonesia, among other places  -- sold Malaysian RBD palm olein at $392.50 a tonne for August to December.

That product was being offered at $397.50 a tonne on Thursday morning by physical palm oil dealers in Kuala Lumpur.

"I think they positioned themselves well to sell down, and sell down they did," an export manager at an oils brokerage in Kuala Lumpur said, referring to the regional group.

Bursa Malaysia's benchmark third-month crude palm oil contract, August, closed down 27 ringgit at 1,362 ringgit ($358.42) a tonne.

It broke two psychological price supports -- 1,380 and 1,360 ringgit -- before rolling back some losses on latte covering.

But dealers doubted Thursday's close would hold and pegged the next major support at 1,350 ringgit. "I would take a while to break 1,350," said one trader.

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 weighs on prices.

Plantation houses surveyed by Reuters on Thursday predicted a 4.2 percent growth in May's production over April, against a 20 percent rise in exports and 7.3 percent drop in closing stocks.

But it could be a different story in June, with output growing at around the same pace, while exports dip about 10 percent and closing stocks rise about 5 percent, dealers said.

"I think people are squaring positions prior to all these numbers," said another futures trader. "That's why there's been so much activity."

The Chicago Board of Trade soybean futures market closed strong on Thursday, rebounding on worries about the potential for summer dryness, traders said.

"We're all still trying to out guess the weather forecasts," said one CBOT floor broker.

Another broker said that nearby forecasts looked wet for the dry eastern Midwest but extended outlooks hinted at a hot, dry pattern setting up for the summer.

The market recovered from a weak open when July fell 8 cents. The nearby found support at $6.59-1/2 then turned higher. July closed 5-3/4 cents higher at $6.73-1/4 per bushel. The deferreds were 3-1/4 to 9 cents higher, with new-crop November up 6-1/4 cents at $6.84-1/4.

Soybeans opened lower as prospects were improving for rain to fall in the dry areas of the eastern Midwest and the Mississippi Delta as Tropical Storm Arlene is active off the Gulf of Mexico. But the storm could also increase the chances for Asian soy rust to move north, CBOT traders said.

Meteorlogix weather on Thursday said rains in the U.S. western Midwest would delay any fieldwork or late seedings of soy for the next week. Meanwhile, showers in the eastern Midwest will improve crop conditions, especially in the dry areas of Illinois.

Weekly export sales data cast an early bearish tone. The U.S. Department of Agriculture said last week sales were 236,100 tonnes (old-crop and new-crop combined). That was near the low end of estimates for 225,000 to 350,000 tonnes.

Old-crop sales of 85,900 tonnes were a marketing-year low and no sales or shipments were earmarked for China, the world's top soybean buyer.

Traders were also evening positions before USDA releases its monthly crop reports on Friday. On average, analysts expect USDA to cut U.S. 2004/05 soy ending stocks by 25 million bushels to 330 million bushels.

Spread trade was active as firms continued to roll positions before the start of the delivery period at month's end. In outright trade, funds bought about 3,500-4,000 lots.

The South American July contract settled 4 cents lower at $6.63 per bushel, with no trade reported.

The soymeal market turned up on technical buying despite weakening demand for U.S. meal as high prices encouraged end users to switch to other high-protein sources for feed rations. July soymeal closed $1.80 higher at $212.90 per ton, with the deferreds up $1.90 to $2.80.

Weekly export sales for soymeal of 84,800 tonnes (old-crop) were supportive -- 55 percent above the previous week and 36 percent over the four-week average. Trade estimates were for 50,000 to 100,000 tonnes.

CBOT soyoil futures rebounded late following soybeans. Early weakness stemmed from ample supplies of soyoil which keeps the CBOT soyoil market under pressure in relation to soybeans and meal, traders said.

July soyoil was up 0.15 at 23.13 cents per lb, with the back months up 0.16 to down 0.22 cent.

USDA's export sales report was neutral for futures.

The USDA said 5,600 tonnes (old-crop) of U.S. soyoil sold for export last week compared with estimates for 2,000 to 7,000 tonnes.

Malaysian palm oil futures were lower overnight. Palm fell amid a selling spree started by a regional trading group and extended by talk of bearish supply-demand for June, said traders in Kuala Lumpur.

Volume was moderate. In soybeans, an estimated 84,504 futures and 25,511 options traded. Soymeal trade was seen at 26,501 futures and 2,673 options. Estimated soyoil volume was 34,139 futures and 2,894 options.

Back

For More Inquiries:
Our e-mail : [email protected]