In The News - 22/06/2005

Malaysian palm oil fell more than 1 percent, coming to an abrupt halt after a three-day winning streak powered by rival U.S. soyoil.

Dealers said 1,450 ringgit still appeared to be a viable resistance for crude palm oil futures, but agreed that level could be breached in the next run-up in Chicago soyoil futures.

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

Soyoil futures on the CBOT, or Chicago Board of Trade, were down in Tuesday's electronic trade, snapping a bull run that began last Thursday on signs of unfriendly weather in U.S. soy growing areas and Washington's plan to use more soy for biofuel.

"We are practically riding on CBOT soyoil now," said a Kuala Lumpur trader in palm oil futures. "Nothing else matters."

By 0530 GMT, e-CBOT's key July soyoil contract <ZLN5> was down 0.15 cent at 25.43 cents per lb, after a low of 25.36 earlier.

In Kuala Lumpur, the benchmark third-month crude palm oil futures contract on Bursa Malaysia Derivatives, September <KPOU5>, ended Tuesday down 18 ringgit at 1,422 ringgit ($374.21) a tonne.

It slid as much as 20 ringgit earlier, touching an intraday bottom of 1,420.

Other traded months <0#KPO:> closed down 17 to 20 ringgit.

Overall volume on the futures market was above average, at 5,216 lots of 25 tonnes each, although only about half of Monday's business. The market usually sees 6,000 lots or more on a busy day.

In physical trade of crude palm oil, June and July contracts saw bids closing at 1,425 ringgit a tonne in Malaysia's southern

region, against offers at 1,430.

In the central region, the contracts saw final bids/offers at 1,422.50/1,425 ringgit.

Trades were reported at 1430-1425 ringgit in both regions towards the close.

Soybean futures at the Chicago Board of Trade closed lower on Tuesday, correcting from Monday's surge to 11-month highs after a volatile session fueled by changing weather forecasts, traders said.

"I think we're seeing a little profit taking since we failed to follow through," said one cash-connected CBOT trader.

"Weather is still going to be hot. We're still waiting for the next rain event that seems to be a week or so out. I don't think people are all that confident in the forecast that they're going to be aggressively selling it," he added.

Also, South American hedging surfaced late when the market hit the day's highs, turning prices lower in the final minutes.

July soybeans <SN5> settled 3-3/4 cents lower at $7.35-1/4 per bushel, with the deferreds steady to down 5-1/2. New-crop November <SX5> closed at 17-3/4 cent premium to July at $7.53, down 4-1/2.

Concerns about dryness and hot weather, especially in the top soy state of Illinois, remain supportive. But the western belt should see substantial rainfall this week.

"Even though the east will get showers, they will be light. The problem continues to be a lack of rainfall in Illinois, Indiana and in Ohio," said Meteorlogix forecaster Joel Burgio.

U.S. soy crop conditions fell last week. The U.S. Department of Agriculture rated 63 percent of the crop good to excellent condition as of Sunday. In Illinois, soy conditions fell 6 points, with 46 percent of the crop rated good to excellent.

The market was viewed technically overbought and ready for a correction -- trading above all key averages. The nine-day relative strength index for the July contract closed at 79 on Tuesday, but down from 82 on Monday. Chartists view an RSI of 70 or above as one indicator of an overbought market.

Export business remained quiet. Midwest cash basis bids were steady to weaker early Tuesday after country sales increased on Monday when the CBOT markets rallied.

The South American soybean contract <BSN5> closed 8-1/2 cents lower at $7.18-1/2 per bushel -- nearly a 17-cent discount to the U.S. July contract.

The soymeal market was choppy, pressured by profit-taking. Also bearish was waning demand for soymeal as high U.S. prices sparked end users to switch to cheaper sources of high-protein feed. Rumors of U.S. buyers importing South American soymeal as price levels were competitive with U.S. also loomed over the market.

But buying by commodity funds keeps trade volatile and continued to underpin prices.

July meal <SMN5> closed 80 cents lower at $231.60 per ton, with the deferreds down 70 cents to $2.

The soyoil market was also lower on spillover weakness from soybeans and profit-taking after its recent surge.

July oil <BON5> was down 0.14 cent per lb at 25.44 cents, with the back months 0.09 to 0.25 weaker.

Malaysian palm oil futures closed lower overnight. Palm fell after a three-day rally that had been powered by rival U.S. soyoil, traders in Kuala Lumpur said.

Trade was heavy across the complex. In soybeans, an estimated 114,469 futures and 38,642 options traded. Estimated soymeal trade was 47,089 futures and 2,675 options. Soyoil volume was pegged at 30,668 futures and 4,376 options.

Funds were net buyers of roughly 1,500 soybeans, 2,000 soymeal and even in soyoil, traders said.

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