In The News - 16/06/2005
Malaysian
palm oil prices fell on Wednesday, reversing the uptrend of the last two days,
after export estimates for the first half of the month fell short of market
expectations.
Palm
oil shipments for June 1 to 15 were estimated to have fallen 9.6 percent to
669,259 tonnes from the 740,058 tonnes tracked between May 1 and 15, Societe
Generale de Surveillance, the market's main cargo surveyor, said on Wednesday.
Another
cargo surveyor, Intertek Testing Services, said earlier in the day that exports
for the same period could have fallen 16 percent.
"It's
surprisingly low," said a shipment manager at a foreign-owned commodity
house in Kuala Lumpur. "We were expecting around 700,000 tonnes for June 1
to 15."
The
benchmark third-month crude palm oil futures contract on Bursa Malaysia
Derivatives, August <KPOQ5>, closed down 3 ringgit at 1,377 ringgit
($362.37) a tonne.
Its
intraday low was 1,371 ringgit while the high was 1,388.
"It
was a bit of a choppy market," said a trader. "There were some people
covering because of the higher expectation for soyoil prices, but in general the
sentiment was weak."
"I
think once SGS's numbers are out, we will see the definite trend for the
day," he said.
Soyoil
futures on the Chicago Board of Trade were up in Wednesday's electronic trade
<0#ZL:>, extending previous day's gains on fresh weather concerns for U.S.
soybeans.
Soy
and palm compete for export destinations and their prices often move in step.
Trade
in crude palm oil futures was fairly brisk, with transactions totalling 4,128
lots of 25 tonnes each. The market sees 6,000 lots or more in a typically busy
day.
Aside
from the benchmark August, other traded months closed down 3 to 9 ringgit a
tonne <0#KPO:>.
Dealers
said the market's upside potential was capped by fears that physical stocks of
palm oil would rise along with the drop in exports.
Palm
oil inventories officially stood at 1,295,276 tonnes at end-May, down 12.42
percent from end-April.
But
dealers say end-June stocks could be around 1.35 million to 1.42 million tonnes.
"We
haven't finalised the numbers, but it's not difficult to anticipate that the
closing stock for June will be much higher because production is certainly not
easing," said another trader.
Monthly
output of palm oil in Malaysia, the world's largest producer, has been at record
highs over the last three months, powered by strong yields.
Production rose 16 percent in March, 2.6 percent in April and 4.2 percent in May.
Soybean
futures at the Chicago Board of Trade soared on Wednesday, climbing above $7 per
bushel with new-crop months making contract highs as weather jitters ignited
another round of fund buying, traders said.
"They're
putting in the risk premium in what happens if they only have a 38 yield or less
in beans," said Dan Cekander, an analyst with Fimat Futures.
USDA
is currently projecting an average U.S. soy yield of 39.9 bushels an acre. A
lack of moisture will obviously cut yields but late-planted beans in the upper
Midwest due to soggy fields will not reach optimum yield potential, sources
said.
"We're
trading a dry forecast for the long term and a cut in acreage," one CBOT
broker said. He was referring to prospects for at least a 500,000 cut in U.S.
soy acres as some beans in the Dakotas and Minnesota were not planted this
spring because it was too wet.
Then
there is the potential spread of the yield-cutting Asian soy rust disease this
summer.
More
money flowing from pools of commodity funds heightened volatility and extreme
price moves on Wednesday, a trend seen since the start of New Year.
Funds
added to their net longs in soybeans, soyoil and soymeal on Wednesday -- buying
about 10,000 bean contracts, 4,000 meal and 10,000 soyoil, traders said.
A
strong soyoil market was also supportive.
Soyoil
futures rallied to a near three-month high on comments made by President George
W. Bush urging lawmakers to pass an energy bill that would increase the use of
soydiesel and ethanol.
While
there was nothing new about the president wanting an energy bill passed,
reminders of increased demand for soydiesel and corn-based ethanol heightened
volatility and buying by commodity funds.
"I
like the idea of spending money on research to make ethanol more feasible so
that someday an American president will say, 'Show me the crop report',"
Bush said in a speech.
New-crop
soybeans led the market higher -- all making contract highs. The spot price
reached its highest level since mid-August, rallying to $7.05-1/2.
Old-crop
July beans <SN5> closed 12-3/4 cents higher at $7.02-1/2. The back months
were up 8-1/2 to 16 cents, with new-crop November <SX5> up 16 at
$7.20-3/4.
CBOT
July soyoil <BON5> closed 0.92 cent per lb firmer at 24.17 cents, after
climbing 1.04 cent to 24.29 cents.
"The
market is focusing on not a lot of rain for the next 10 days and it will be
hotter, but not alarming," said Meteorlogix forecaster Joel Burgio.
"The
temperatures Monday through Wednesday may reach the low to mid-90s (degrees
Fahrenheit)," Burgio said. "I know some have said it will be hotter
than that but we don't see that."
Export
business remains quiet as a higher U.S. dollar was deterring fresh sales. Also,
South America had a hefty supply of cheaper beans.
"The
cash markets are a disaster," said one floor broker. "That's reflected
in board spreads -- they're so weak."
New-crop
November is trading at a 18-1/4 cent premium to old-crop July.
Commercials
were sellers amid farmer hedge pressure as U.S. and South American sales
increased as the market rallied.
The
South American July soy contract <BSN5> closed 16 cents higher at $6.94.
Volume was strong estimated at 182 lots.
Soymeal
futures followed soybeans and continued to be supported by technical buying by
commodity funds.
The
spot price in soymeal reached an 11-month high on Wednesday and the July meal
contract <SMN5> reached on one-year top of $225 per ton. It closed $3
higher at $223.90.
Meal
market continues to rally even though demand has backed off due to higher U.S.
prices this spring.
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