In The News - 28/07/2005

Malaysian crude palm oil futures ended lower in slow trade on Wednesday as investors waited for fresh leads, dealers said.

The Bursa Malaysia Derivatives' benchmark third-month palm oil contract, October <KPOV5>, ended 2 ringgit lower at 1,363 ringgit a tonne ($363.46).

The day's high was 1,367 ringgit, while the low was 1,356.

Other traded months <0#KPO:> settled 1 to 3 ringgit down.

"The market moved in a very narrow range. It was not going anywhere. People are in a wait-and-see attitude," said one dealer.

"They are waiting for some fresh news to come out. With no fresh news, they don't know what to do."

Overall volume was 3,579 lots of 25 tonnes on Wednesday. Tuesday's business was 3,637 lots. The market usually sees 6,000 lots or more traded on a busy day.

Dealers said the market could move in a narrow range in the next few days and follow the CBOT market in the absence of any other guide.

Soy and palm compete for similar export destinations but their prices often move in step.

Soyoil futures on the Chicago Board of Trade (CBOT) ended lower in electronic trade on Wednesday with the August contract down 0.14 cents to 24.29 cents a pound by 1030 GMT <ZLQ5>.

The CBOT's electronic session commences during Asian market hours and ahead of formal trading in Chicago, which begins at 1400 GMT.

(US$1=3.75 ringgit)

Nearby Chicago Board of Trade soybean futures closed lower on Wednesday after prices see-sawed throughout the session as traders tried to come to consensus on the status of the U.S. soybean crop amid changing weather patterns, traders said.

"Bean pricing was affected by yesterday's rains," one CBOT broker said.

Scattered showers of 0.30 to 1.50 inch that fell over much of the U.S. Midwest crop belt the past day helped parched soybeans more than corn, traders said. Midday forecasts were also a little wetter, which could help the crop as it sets and fills pods in August -- the critical period for determining soybean yields. But moisture was less beneficial to corn as it was nearing the end of pollination after a hot, dry July.

That triggered corn/soybean spreading as well as wheat/soybean spreads.

August soy <SQ5> closed 2-1/4 cents per bushel lower

at $6.73-3/4. New-crop November <SX5> settled 2-1/2 cents weaker at $6.86-1/2, after a 10-cent trading range with prices on either side of Tuesday's settlement.

But volume was light compared to recent trends, floor traders said.

"We just had this rain event through all of the Midwest. We've had enough rain to last us for a week or so, but if we bring back the heat the middle part of August, and don't have rain in the meantime, you could start clipping the bean yields again," said one cash-connected trader.

The market is currently trading on ideas of a U.S. soy crop yield of 38 to 39 bushels per acre, down from the government's current estimate of 39.9 bushels per acre.

Many analysts are also shaving their harvested acres from USDA's current estimate of 72.4 million. With a yield of 38 to 39 bushels, traders are looking at a crop of about 2.8 billion bushels. down significantly from last year's record 3.1 billion bushels.

But a lot can happen during August to either raise or lower soybean yields, traders said.

Meteorlogix weather service said early Wednesday that rainfall and cooler temperatures at midweek in the Midwest may help stabilize crop conditions. However, weather next week may be hotter and drier, which could again begin to stress crops.

Exports remain slow as buyers turn to Brazil and Argentina for cheaper supplies. There was talk that China purchased Argentine soyoil and soybeans, traders said.

Overnight U.S. export business was viewed routine, with Taiwan setting a tender for Friday to buy 12,000 tonnes of U.S. corn and 23,000 tonnes of U.S. soy.

Midwest cash basis bids for soybeans early Wednesday were steady to weak, dealers said.

The soymeal gained on soyoil after a choppy and lightly traded session. Traders were evening August positions before first notice day on Friday. August soymeal <SMQ5> closed 10 cents higher at $213.50 per ton. August soyoil <BOQ5> was down 0.12 at 24.31 cents per lb.

The CBOT August crush was up 1.15 cent per bushel at 63.36 cents per bushel.

A firm U.S. cash soymeal market was supportive. Cash offers were underpinned by western processors taking seasonal downtime and eastern crushers bidding up for soybeans as they try to replace their crush.

U.S. Census Bureau will release its June crush data Thursday. Crush was estimated at 131 million bushels, down from 142.8 million in May. U.S. soymeal and soyoil stocks were seen lower. The average of analysts' estimates for meal stocks was 273,300 tons, compared to 349,027 tons the previous month. The average of U.S. soyoil stock estimates was 1.848 billion lbs, vs. 1.897 billion in May.

Malaysian palm oil futures closed weak overnight. Trading was slow as the market awaited fresh news, traders in Kuala Lumpur said.

Winnipeg Commodity Exchange canola futures settled steady to lower on Wednesday in thin trade, with a lack of farmer selling leaving scale-down exporter buying unfilled, traders said.

Canola ended steady to $2.40 per tonne lower, with November <RSX5> steady at $297.90 and January <RSF6> down 60 cents at $305.30.

"Good demand in the marketplace, but just not enough willing sellers, not enough outside direction to definitively take us lower or higher," a canola trader said.

Canola volume was estimated at 1,157 contracts, down from a total of 4,154 on Tuesday.

Rumors that Canada has booked sales of canola to China continued to be discussed, but with less skepticism than on Tuesday, when the talk buoyed values.

Some traders said only one cargo had been booked, with another two possible. Others said two cargoes had been confirmed, while other rumors put two cargoes as Canadian origin and one as Australian origin.

No confirmation of prices could be obtained, although traders believed the business was done at aggressive values in an effort to move what is expected to be a huge crop.

Some traders said commercial buying had stepped away from the market on Wednesday, while others saw scale-down demand around $296 per tonne, basis November.

Light farmer selling was attracted at the highs of $300 per tonne, basis November, but few other participants wanted to sell canola ahead of the upcoming long weekend, and in the face of weather risk that could buoy U.S. soybean values.

"You don't want to put on a big short at these levels: the risk is too great," a trader said.

An estimated 104 November/January spread traded between $7.30 and $7.90.

October barley <ABV5> settled unchanged at $121.00 per tonne in light volumes, with 219 contracts trading, down from 277 contracts on Tuesday.

October feed wheat <WWV5> ended unchanged at $103.10 per tonne, with December <WWZ5> down 20 cents at $107.60.

Feed wheat volume was estimated at 98 contracts, down from 877 on Monday. An estimated 10 October/December spread traded at $4.50.

In options trade, 145 October feed wheat $100 puts traded at $3.00.

Western Canadian crop conditions appear excellent, which could leave Canada with ample supplies of milling wheat but little feed quality wheat, traders said.

"The downside risk isn't big," a trader said, noting an early frost or excessive fall rains could dramatically increase supplies.

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