In The News - 22/07/2005

Malaysian crude palm oil futures remained weak on Thursday with buyers sidelined by a fresh retreat in U.S. soyoil and disappointing palm oil export data released a day earlier.

But the market looked well supported at above 1,400 ringgit a tonne despite talk of a sharp slide in demand and growth in production for July, said traders. 

"The prices aren't great, but I think we'll stick above 1,400 -- for now at least," said a trader.

The benchmark third-month crude palm oil on Bursa Malaysia Derivatives, October <KPOV5>, closed down 3 ringgit at 1,408 ringgit ($370.53) tonne. The low for the day was 1,406.

The contracy briefly broke 1,400 ringgit on Wednesday, touching 1,398 at one point, before bouncing back on technical support.

Other traded months on Thursday were down 1 to 4 ringgit <0#KPO:>.

Trade was light, at 2,228 lots of 25 tonnes each. The market usually sees 6,000 lots or more on a busy day.

"People don't want to commit unless there's a real reason," said a trader. "At the moment, there's little incentive for buyers to go long, with the way production could be this month."

Output of palm oil in Malaysia, the world's largest producing country, could grow three percent in July from the official figure of 1.2 million tonnes in June, dealers said.

That contrasted with the 26 percent drop in exports for July 1 to 20, forecast by the market's leading tracker of palm oil shipments, Societe Generale de Surveillance.

Dealers said prices were also weighed down on Thursday by a fresh slide in U.S. soyoil, which has supported most of the gains in palm oil over the last fw months.

Soy and palm compete for export market and their prices often move in step.

Soyoil futures on the Chicago Board of Trade were down in Thursday's electronic session <0#ZL:>, with nearby August showing a drop of 0.37 cent to 24.36 cents by 1000 GMT. The CBOT's electronic session commences during Asian market hours and ahead of the formal trade in Chicago, which begins at 1400 GMT.

Soybean futures at the Chicago Board of Trade shed another 2 percent of value on Thursday and fell to near 3-week lows because more rain fell than expected at midweek in the U.S. Midwest and amid outlooks for better crop weather ahead, traders said.

"I don't think it will be enough (rain) to end concerns about dryness as we go into August from Illinois westward. But it's alleviating the fears of a major crop problem," said Meteorlogix forecaster Mike Palmerino.

CBOT soy closed unchanged to 15 cents per bushel lower.  August <SQ5> was down 15 at $6.69-1/2 per bushel. New-crop November <SX5> was down 15 at $6.79-1/2.

Volume was estimated by the exchange at 81,123 futures and 33,251 options.

Soy ended lower but above the day's lows on a late bout of short-covering. Spot August closed above its' 50 day moving average of $6.68-1/4.

Pressure stemmed from extended forecasts for cooler and wetter weather in key soy producing states including top producers Iowa and Illinois, the traders said.

Meteorlogix said more rain than expected fell in Iowa on Wednesday and overnight, and the storms will move into Illinois on Thursday. Hot weather is likely in the Midwest by the weekend, but cooler weather is expected next week, Meteorlogix said. Extended outlooks also call for cooler weather and near normal rainfall for the Midwest, Meteorlogix and other forecasters said.

Fund selling continued to hit prices and there was very little if any underlying support from news China had revalued the yuan, which increases the buying power of Chinese importers.

"I think long-term if the Chinese economy continues to grow, their food demand continues to grow, they continue to expand their urban sprawl and take a little production out then eventually they may be a little more of a net importer of grains and beans but I don't think we can say that right now," said Steve Freed, analyst for ADM Investor Services.

USDA's weekly export sales report was bearish for soybean futures.

USDA said 65,700 tonnes of U.S. soybeans (old crop) were sold for export last week. That's below trade estimates for 75,000 to 175,000 tonnes.

Exports were quiet overnight and cash basis bids for soybeans in the Midwest late on Wednesday were mostly steady to firm amid a slowdown in farmer sales.

Soymeal futures also lost more than 2 percent of value, ending down $5.00 to up 10 cents per ton on fund selling in a volatile Midwest weather market. August <SMQ5> was down $4.40 at $212.60 per ton.

Soymeal volume was estimated at 34,601 futures and 3,215 options.

USDA's export sales report was neutral to bearish for soymeal futures. USDA said 44,300 tonnes of U.S. soymeal (old crop) were sold for export last week. That's below trade estimates for 50,000 to 100,000 tonnes.

Soyoil futures closed 0.12 to 0.45 cent per lb lower with the market taking its cue from the sharp drop in soybean futures. August <BOQ5> was down 0.42, or 1.7 percent, at 24.31 cents per lb.

Soyoil volume was estimated at 35,271 futures and 1,719 options.

Only mild underpinning stemmed from USDA's export sales report. USDA said 7,100 tonnes of U.S. soyoil (old crop) were sold for export last week. That's slightly above trade estimates for 1,000 to 6,000 tonnes.

Malaysian palm oil futures closed weak overnight. Traders in Kuala Lumpur said palm remained weak with buyers sidelined by a fresh retreat in U.S. soyoil and disappointing palm oil export data released a day earlier.

The Malaysian ringgit opened about 0.4 percent higher against the dollar on Friday, a day after China and Malaysia dropped their currency pegs to the U.S. dollar and moved to managed floats.

Analysts had expected the ringgit to trade anywhere between 2-3 percent firmer, in line with the Chinese yuan's revaluation.

The ringgit will be managed against a basket of currencies, Malaysia's central bank said on Thursday, announcing its currency change just after China's decision to revalue the yuan.

"It has just been dealt at 3.785. Local exporters are selling dollars," a Singapore-based trader said.

Malaysia has kept its currency <MYR=> pegged at 3.8 to the dollar since September 1998, when it was adopted as an emergency measure to weather the Asian financial crisis, but the ringgit has begun to look significantly undervalued to economists in recent years.

"The market will definitely try and push both the yuan and ringgit higher but this will be resisted by the authorities," said John Cairns, head of research at IDEAglobal in Singapore.

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