In The News - 28/06/2005

Malaysian palm oil prices were down slightly after tracking fresh losses in rival U.S. soyoil.

Volume on the futures market was light, with players split on direction as soyoil turned soft in Monday's electronic trade

after strong gains at last week's close.

"I think people want to see how Chicago performs tonight and get a clear direction," said a futures trader in Kuala Lumpur.

"That probably explains the volume."

Talk that production of crude palm oil in June could be down by five percent compared with previous estimates of a 3 percent rise also kept prices from falling further, said another dealer.

A lower production could cut stocks of palm oil in the market, bolstering prices already bullish from chasing the rally in soyoil.

"No one's too sure about the production at this juncture and all sorts of numbers are coming around, so the market's a little excited," said the dealer.

The government-run Malaysian Palm Oil Board will release on July 10 official production, exports and closing stock numbers for June.

Officials from five major plantation groups told a Reuters survey last week that output for this month could be down three percent from May.

The market's leading cargo surveyor, Societe Generale de Surveillance (SGS), signalled on Monday that exports of palm oil were doing better than expected, meaning that stocks at end-June could be even lower than forecast.

Soybean futures at the Chicago Board of Trade dived to two-week lows on Monday, with the nearby months locking down the 50-cent limit as outlooks for cooler weather this week were seen easing stress to the U.S. soybean crop, traders said.

Forecasters called for temperatures to turn cooler by Thursday and Friday, with highs in the 70s to 80s (Fahrenheit). Sizzling temperatures blanketed the Midwest crop region over the weekend, and highs ranged from 88 to 96 degrees, Meteorlogix weather service said.

"It's a summer weather market. Any time you get that breakdown in temperatures, the market is going to react," said Randy Mittelstaedt, an analyst with R.J. O'Brien, a Chicago trading house.

Also bearish were beneficial rains over the weekend in crop areas of China and India's monsoon spreading, helping to aid the sowing of winter crops.

The front six months closed locked limit-down, preventing the market from moving lower. Sell-stops were hit all along the way. July <SN5> settled at $6.94-1/2 and new-crop November <SX5> at $7.15-3/4 per bushel.

There were roughly 2,000 November, 200 August and 300 July futures contracts for sale as of the close. Synthetic option positions at the close pointed toward a 3-to-4 cent lower open in CBOT soybeans in overnight trade, floor traders said.

Some Midwest dealers were posting 5 to 10 cents protection on soybeans, anticipating a lower open CBOT overnight trade.

Volatility in soybeans was expected to continue, given the large net long position held by funds and uncertainty about how much rain will move through the parched eastern Midwest this week.

Funds sold about 13,000 to 14,000 lots; commercials were buyers, traders said.

"I don't think there is much dispute that the temperatures cooled down. It's just a question of how much rain comes through with it. It's going to be one of those classic situations -- the front comes through, and in the morning, do we find we had a lot of rain, or not much rain from it?" said Bill Nelson, an analyst with A.G. Edwards.

Last week's heat and lack of rain stressed the U.S. soybean crop. As expected, USDA cut crop condition ratings by 4 points, rating 59 percent of U.S. soybeans good to excellent as of Sunday, compared to 63 percent the previous week.

U.S. export business remained slow as importers turned their attention to South American soybeans.

USDA reported early Monday that 4.5 million bushels of soybeans inspected for export last week. That was on the low end of estimates for 4 million to 8 million and well below levels seen earlier in the year.

A division of Taiwan's Breakfast Soybean Procurement Association will hold a tender on Tuesday for 40,000 to 60,000 tonnes of U.S. or Brazilian soybeans, a group source said.

Midwest cash soybean basis bids were mixed, with demand remaining weak.

The soy product markets followed the tumble in soybeans. July soymeal <SMN5> closed $15.80 per ton lower at $215.40, with the deferreds down $10.20 to $18.50.

July soyoil <BON5> fell to 24.52 cents, down 1.63 cents per lb. The deferreds closed 0.97 to 1.75 cents lower.

The trading limit is $20 in meal and 2 cents in soyoil.

Malaysian palm oil prices were down slightly after tracking fresh losses in U.S. soyoil. Volume was light, with players split on direction as soyoil turned soft in Monday's electronic trade.

The Commodity Futures Trading Commission traders' report showed the large speculators but their net longs in CBOT soybean futures during the week ended June 21, but expanded their longs in both soymeal and soyoil.

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