In The News - 14/06/2005

Malaysian palm oil futures recovered earlier losses to close mostly higher on Monday due to late covering and a rebound in the soyoil market.

By the close, the benchmark third-month crude palm oil on Bursa Malaysia Derivatives, August, settled seven ringgit higher at 1,380 ringgit ($363.16) a tonne.

Overall volume was moderate at 5,366 lots.

The August contract had fallen to a low of 1,364 ringgit -- just above a key support of 1,350 ringgit -- in afternoon trade as physical buyers retreated and demand slackened on weak refining margins.

But a rebound in soyoil futures prevented further losses and players would closely watch the U.S. soy markets for direction.

The July soyoil contract on the Chicago Board of Trade electronic trade was up 0.23 U.S. cents at 22.97 cents per lb.

CBOT soyoil futures have been under pressure because of ample U.S. soyoil stocks. The U.S. Department of Agriculture raised its U.S. 2004/05 end oil stocks to 1.526 billion lbs from 1.241 billion lbs.

Soy and palm oil compete for export destinations and their prices often move in step.

"We saw some short covering because the market had dropped quite a lot," said one dealer in Kuala Lumpur.

"There's no news to drive the market, so I guess we will be looking at Chicago for direction tomorrow," he said.

 The market's next leads will be the June 1-15 palm oil exports data due on Wednesday.

In the physical crude palm oil market, the June/July contract was offered at 1,395 ringgit a tonne against bids of 1,390 ringgit in the southern region.

Deals were reported at 1,385 to 1,390 ringgit. The June/July contracts saw bids at 1,385 ringgit a tonne against offers at 1,390 ringgit in the central region.

Deals were done at 1,380 to 1,385 ringgit a tonne for June and at 1,385 ringgit for July.

Soybean futures at the Chicago Board of Trade closed sharply higher on Monday on crop concerns amid fears about soy rust disease and some extended forecasts calling for warm, dry Midwest weather, traders said.

Dryness in central Illinois, a key soy area, was another worry.

"Weather is the total focus and, obviously, USDA putting out the rust alert kept sellers away from here," said Mark Cermak of Chicago trade house O'Connor and Co.

The remnants of Tropical Storm Arlene blew significant amounts of soy rust spores into South Carolina, Alabama, Mississippi, Louisiana, Tennessee and Kentucky, the U.S. Agriculture Department said on Monday.

Smaller amounts of the fungus were spread into southeastern Missouri and the lower Ohio Valley, the USDA's rust-monitoring Web site said.

July soy closed 14-1/4 cents per bushel higher at $6.80-1/2. The deferreds were up 8-1/2 to 16-1/2 cents and new-crop November was up 16-1/2 at $6.94-1/2.

Farmer hedge pressure stemming from U.S. and South American sales brought the market off its highs, floor traders said.

Commodity funds were featured buyers in soybeans, as well as soymeal and soyoil, traders said.

Spread trade was active in all three markets as firms rolled July positions before the start of the delivery period at month's end.

Adding fuel to the rally were outlooks for a high pressure ridge moving into the Plains and Midwest the next two weeks, possibly blocking moisture from several key crop areas, analysts said.

Any potential dryness in the Midwest will only exaggerate the situation in central Illinois, where the rainfall is 5 to 6 inches below normal, meteorologists said.

"The bottom line is central Illinois received some showers, but not a lot. For some reason central Illinois is not favored," said Meteorlogix forecaster Joel Burgio.

After the close, the USDA reported that the U.S. soy crop conditions improved by 2 points with 64 percent of U.S. beans rated good to excellent.

Export business offered no support. USDA said Monday U.S. weekly export inspections were at 7.6 million bushels last week. That was within estimates for 4 million to 9 million, but no bushels were earmarked for China, the world's top soy buyer.

Exports were also quiet over the weekend.

Japanese oilseed crushers will probably be looking for U.S. or Brazilian beans this week to take advantage of lower premiums, traders in Taipei and Tokyo said on Monday. Brazilian soy may be a better buy because of the recent weakness in the Brazilian real versus the dollar, they said.

Midwest cash basis bids for soybeans early Monday were steady to weak amid sluggish demand for soybeans from exporters and domestic buyers.

Soymeal futures were strong, up $4.30 to $5.70 per ton, with July <SMN5> up $5.50 at $216.90, following the weather rally in soybeans.

Soymeal futures were also underpinned early by commercial bidding and mostly steady U.S. cash markets. Seasonal Midwest downtime was supporting cash values but demand was quiet due to high prices.

The soyoil market also rallied, following soybeans. July oil <BON5> closed up 0.27 cent per lb. at 23.01 cents, with the deferreds up 0.15 to 0.30 cent.

The National Oilseed Processors Association will release its May crush data on Tuesday. Analysts expect NOPA to report a monthly crush of 132 million to 136 million bushels.

In export news, Iran said on Monday it had tendered to buy 15,000 tonnes of palm olein vegetable oil.

Malaysian palm oil closed mostly firm overnight.

The Commodity Futures Trading Commission trade data showed on Friday speculators expanded their net long positions in CBOT soybeans, soymeal and soyoil in the week ended June 7.

Estimated volume large with much of it stemming from spread trade, floor traders said. In soybeans, an estimated 99,910 futures and 32,307 options traded. Soymeal trade pegged at 32,263 futures and 1,348 options. Estimated soyoil trade seen at 30,798 futures and 713 options.

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