In The News - 20/06/2005

Malaysian crude palm oil futures jumped one percent, rebounding from morning losses, as players took their cue from a fresh rise in rival U.S. soyoil to chase prices up for a second straight day.

But dealers wondered if the key support level of 1,400 ringgit a tonne, recaptured after an 11-day gap, would hold as talk swirled that exports data for June 1 to 20 due next week were likely to show a sharp drop from a month ago.

Two cargo surveyors, Societe Generale de Surveillance (SGS) and Intertek Testing Services (ITS), will issue on Monday estimates on Malaysian palm oil shipments for the first 20 days of June versus May 1 to 20.

Some dealers got wind of ITS's numbers on Friday, saying the cargo surveyor was expected to declare a maximum 850,000 tonnes from a previous estimate of 994,180 tonnes.

"That's a big drop," said a palm oil trader. "It's really debatable whether we'll hold at 1,400 ringgit with such exports."

"In case we don't, then we're talking about returning to the old support of 1,380 ringgit, or even 1,350."

Soyoil futures on the Chicago Board of Trade have been on the uptrend in the last 1 ½   days, showing only a brief respite on Friday morning.

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

In Friday's e-CBOT trade, soyoil's key July contract ended up 0.27 cent at 24.37 cents a pound, setting the stage for further gains when formal trading begins in Chicago at 1430 GMT.

In Kuala Lumpur, the benchmark third-month crude palm oil futures contract on Bursa Malaysia Derivatives, September <KPOU5>, ended Friday's trade up 14 ringgit at 1,409 ringgit ($370.79) a tonne.

Its high for the day was 1,410 ringgit and low 1,388.

Other traded contracts <0#KPO:> settled up 13 to 14 ringgit.

Trade crossed the 6,000-lot mark typically seen on busy days, with a final volume of 6,569 lots of 25 tonnes each.

Soybean futures at the Chicago Board of Trade soared to near 11-month highs on Friday, as fears that hot, dry weather in the Midwest next week will hurt the U.S. soybean crop ignited aggressive buying by commodity funds, traders said.

"It's the same story -- lack of rain, funds buy. It's an emotional thing here," one CBOT soy broker said.

The July contract <SN5> rose to $7.27-1/2 before closing at $7.24, up 23-1/4 cents per bushel. All months made contract highs, with new-crop November <SX5> reaching $7.46 before closing 21 cents higher at $7.41-1/2.

The influx of late buying by funds, especially in corn, heightened the volatility across the floor. Traders estimated that funds bought about 8,000 soy lots. Refco and Cargill Investor Services each bought 1,200 to 1,500 November.

"I think we're definitely going to stay dry for the next full week and see a lot of warm weather. It should peak out in the Plains around 100 degrees Fahrenheit, around 96 to 97 F in roughly the western Midwest, and in Illinois around 94 F," said Drew Lerner, meteorologist for World Weather Inc.

Some forecasters were less aggressive in the amount of heat predicted for next week but they agreed temperatures would reach the 90s in the Midwest.

Added to those worries were outlooks for fewer U.S. bean acres planted this spring.

Analytical firm Informa Economics pegged 2005 U.S. soybean acreage at 72.9 million, below USDA's current forecast for 73.9 million, industry sources said.

Traders were expecting a cut of at least a 500,000 in U.S. soybean acreage after a soggy spring in the upper Midwest prevented farmers from getting the last of their beans planted. U.S. farmers were also seen planting more corn than originally forecast in March, cutting into soy seedings.

Export business remained slow and U.S. processors dropped their spot bean bids late this week as the CBOT rallied spurred enough movement to replenish nearby crushing needs, dealers said.

Commercial hedge pressure surfaced again on Friday as South American and U.S. country sales increased as the market climbed, traders said.

The South American soybean contract rallied to contract highs across the board, with July <BSN5> closing 15 cents higher at $7.10 per bushel. Estimated volume was large at 280 contracts.

The soyproduct markets rallied, following soybeans in a volatile weather market.

July soymeal <SMN5> closed $6 higher at $229 per ton, with contract highs made in several deferred contracts.

Soyoil was also strong, closing 0.67 to 1.05 cent per lb firmer, with July <BON5> up 0.98 at 25.08 cents. The back months from October forward made new highs.

Soymeal futures remain technically strong, despite a bearish fundamental outlook. The rally in U.S. meal prices was forcing end users to switch to cheaper sources of high-protein feed.

There was also talk that South American meal values were attractive to U.S. customers, which could entice some livestock producers to import South American meal, traders said.

Soyoil futures have the greatest potential for funds to extend their longs compared with soybeans and soymeal, CBOT traders said this week. While funds are net long across the CBOT soy complex, they hold the least length in soyoil.

Funds bought about 5,000 soyoil lots and 4,000 meal.

Malaysian palm oil futures closed higher overnight. Traders in Kuala Lumpur said players took their cue from a fresh rise in rival U.S. soyoil.

Volume was heavy. In soybeans, an estimated 117,422 futures and 53,869 options traded. Estimated soymeal trade was 47,973 futures and 4,594 options. Soyoil volume was seen at 36,778 futures and 3,127 options.

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