In The News - 15/06/2005

Malaysian palm oil futures ended mostly higher on Tuesday but dealers were cautious ahead of the release of key export data, which may confirm fears of declines in shipments.

Benchmark August settled unchanged at 1,380 ringgit a tonne after touching a high of 1,384 ringgit that reflected gains by U.S. soyoil futures.

Overall volume was moderate at 2,812 lots.

Dealers reported sales of RBD palm olein at $390 a tonne, free on board, by a major trading firm in afternoon trade. The market was waiting for cargo surveyors Intertek Testing Services (ITS) and Societe Generale de Surveillance (SGS) to release their export estimates for June 1-15 on Wednesday.

Dealers said exports of Malaysian palm oil products could reach around 700,000 tonnes in the first 15 days of June, down from 740,058 for May 1-15 as estimated by SGS, whose numbers are more closely watched by the market.

Exports for the whole of June were seen falling to 1.2 million tonnes, compared with 1,357,689 tonnes in May, because of slow seasonal demand.

"We are simply waiting for the exports data. Most people agree the numbers will be around 700,000 tonnes," said one dealer in Kuala Lumpur.

Dealers said higher-than-expected exports could push up the August contract to 1,420 ringgit but weak numbers could drag down prices to 1,360.

"There are quite a number of uncertainties in the market. There are fears that end-June stocks will increase by 50,000 tonnes if exports only reach 1.2 million tonnes this month," said another Kuala Lumpur dealer.

In the U.S. market, July soyoil closed up 0.27 cent per lb at 23.01 cents on Monday, tracking a rally in soybean futures amid fears about soy rust disease.

In the physical crude palm oil market, the June/July contract was offered at 1,390 ringgit a tonne against bids of 1,385 in the southern region.

Deals were reported at 1,385-1,390 ringgit for June and at 1,390 for July.     

Soybean futures on the Chicago Board of Trade were strong on Tuesday as some forecasts for hot, dry weather next week fueled another rally, traders said.

New-crop November hit a new contract high of $7.09.

The intensity of the moves added volatility, especially as investment money pooled by commodity funds continues to flow into agricultural markets.

"Weather starts it," said one CBOT floor broker. "But we're all looking for reasons why it's up so much. There's just more money flowing into the market."

July soybeans closed 9-1/4 cents higher at $6.89-3/4 per bushel, rallying to $6.95 after pushing through $6.90 resistance.

The back months were also strong, with new-crop November up 10-1/4 cents at $7.04-3/4 and closing at a 15-cent premium to July. That premium continues to build as traders price in a smaller U.S. 2005 soybean crop, traders said.

Commodity funds were featured buyers across the soy complex, buying about 5,000 soybean lots, 3,000 meal and 1,000 oil, traders said.

While traders were focused on dry forecasts for next week, recent rains across the Midwest shrunk the amount of dry crop land in the eastern belt and helped improve crop conditions, traders said.

In fact, the upper Midwest was too wet and there was a good chance that several bean acres will not be planted because fields were soaked, analysts said.

The U.S. Agriculture Department late Monday rated 64 percent of the U.S. soy crop good to excellent, up from 62 percent last week.

"At $7 (November beans), we've priced in a 500,000-acre reduction," one CBOT soy broker said.

Adding to that were concerns about possible yield reductions from Asian soy rust.

A bigger-than-expected monthly crush was supportive. The National Oilseed Processors Association said on Tuesday U.S. processors crushed 136.7 million bushels in May, higher than the average of analysts' estimates for 134.5 million.

Export business remained quiet. A higher U.S. dollar and cheaper South American supplies were keeping importers' interest in Brazilian and Argentine soybeans.

Midwest soybean basis bids were mostly steady on Tuesday, despite country movement on Monday, when the CBOT rallied, dealers said. There was increased country sales on Tuesday as prices climbed, floor traders said.

The South American soybean contract closed mostly higher, with July up 7 cents at $6.78 -- an 11-3/4-cent discount to the U.S. July contract. Estimated volume was the heaviest in nearly two weeks estimated at 70 contracts.

The soymeal market closed higher on technical buying. July <SMN5> was up $4 at $220.90 per ton, with the back months up $2.30 to $4.60.

"Funds are building huge longs in beans and meal," one CBOT floor broker said.

Open interest in the July contract was large at 67,562 lots as of Tuesday's open and heavily weighted by speculative ownership, traders said.

The soymeal rallied despite lackluster soymeal demand as the rally in CBOT meal prices sparked end users to switch to cheaper high-protein feeds for livestock rations.

The National Oilseed Processors Association on Tuesday pegged U.S. soymeal exports in May at 330,692 tons, versus  417,783 tons in April.

CBOT soyoil futures recovered from a weak open, following the strength in soybeans. Prices were pressured early by reminders of ample supplies of U.S. soyoil.

July was up 0.24 cent at 23.25 cents per lb., with the back months up 0.10 to 0.20.

NOPA reported on Tuesday U.S. oil stocks as of the end of May were 1.571 billion lbs., up from 1.477 billion in April. The April figure was revised upward from 1.459 reported last month.

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