In The News - 29/07/2005

Malaysian crude palm oil futures were up on Thursday, tailing a rally in U.S. soyoil.

But dealers said prices could be under pressure in the near term as plantation groups expect both production and stocks of palm oil to rise in July over June.

The benchmark contract breached the 1,370 ringgit a tonne level as players bought on the rise in Chicago soyoil futures.

But gains beyond the key psychological level of 1,400 ringgit a tonne may be difficult given concerns over crop and supply, dealers said.

"Whatever estimates we have so far don't suggest that the market can be fundamentally supported at above 1,400 ringgit," said a trader.

A Reuters survey on Thursday showed output of palm oil in Malaysia, the world's top producer, could be 3.5 percent higher in July than June as crops begin a fresh ascent in yield.

Exports could dip 14.45 percent, while stocks may rise 8.59 percent [nKLR274017].

At Thurday's close, the benchmark third-month palm oil contract on Bursa Malaysia Derivatives, October <KPOV5>, ended up 15 ringgit, or 1.1 percent, at the day's high of 1,378 ringgit ($367.42) a tonne.

Other traded months closed up 7 to 14 ringgit <0#KPO:>.

Volume was average at 3,514 lots of 25 tonnes each.

Much of the trade and gains took place just before the close as short covering activity emerged. Dealers also attributed the positive close to influence from a strong U.S. soyoil.

Soyoil futures on August soyoil on the Chicago Board of Trade rose as much as 0.19 cent a lb in Thursday's electronic trade <ZLQ5>, extending Wednesday's rally notched on the back on fresh weather woes in U.S. soybean growing areas.

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

1400 GMT.

($1=3.75 ringgit)

Soybean futures at the Chicago Board of Trade rallied on Thursday as traders added some weather premium to the market on hot, dry weather forecasts, traders said.

"We put the heat premium in. If it doesn't come, we take it out," said Don Roose, analyst with U.S. Commodities in West Des Moines, Iowa.

That has been the story of the soybean market all summer as traders remain fickle on weather outlooks. That should only heighten during August, the critical yield-determining period for soybeans when they set and fill pods.

Recent rains that covered 90 percent of the Midwest gave soybeans a much-needed drink, but more will be needed in August to make the crop, traders said.

August soybeans <SQ5> closed 10-1/2 cents higher at $6.84-1/4 per bushel and new-crop November <SX5> was up 11-3/4 cents at $6.98-1/4.

"The recent break in the heat wave, along with the recent rains, helped ease stress to the crops. But, as we look out the next seven days, we don't see any additional significant rainfall, so soils will begin to dry out again and should increase stress to crops," Meteorlogix forecaster Joel Burgio said.

The eastern Midwest was under the greatest stress, especially Illinois, the top soybean producer. The U.S. Department of Agriculture late Wednesday declared virtually all Illinois a disaster area.

Weather jitters sparked a round of speculative trade, with funds buying about 2,000 lots. The day's rally also sparked some country movement in the western belt that led to commercial hedge pressure, traders said.

The export picture was dismal. The U.S. Department of Agriculture said export sales of U.S. soy last week totaled a net 2,800 tonnes (old and new crop).

Net sales reductions of 62,800 tonnes for old-crop soy were partially offset by net sales increases of 65,600 tonnes of new-crop. The decline in old-crop soy sales stemmed mainly from cancellations by South Korea, Taiwan and unknown destinations.

U.S. Census Bureau June crush data was viewed market neutral as the June numbers were close to trade expectations. Census said the June U.S. soy crush was 131.72 million bushels, compared to the average of trade estimates at 131.0 million.

U.S. meal stocks were 241,489 tons, slightly below the average trade estimate for 273,300 tons. That could help underpin soymeal prices.

Census reported soyoil stocks at 1.840 billion lbs., about in line with an average trade estimate for 1.848 billion.

Midwest cash basis bids for soybeans early Thursday were steady to firm in the eastern belt and steady to weak in the west, dealers said.

Soymeal and soyoil futures followed the action in soybeans. August soymeal <SMQ5> was up $2.30 per ton at $215.80, while August soyoil <BOQ5> was up 0.19 at 24.50 cents per lb. CBOT August crush was down 3.35 cents at 60.01 cents per bushel.

Traders evened August positions before first notice day on Friday. Spread trade was noted in all three pits, with commercial bull spreading featured in soymeal. That underscored the firmness in U.S. cash soymeal markets -- western offers underpinned by downtime and eastern levels supported by a lack of bean movement.

No soymeal or soyoil deliveries were expected. Soybean deliveries were estimated at 200 to 500 lots.

Export data was supportive for meal and bearish for oil.

USDA on Thursday said 110,400 tonnes of U.S. soymeal (old and new crop) was sold for export last week. That was well above trade estimates for 30,000 to 70,000 tonnes.

Soyoil export sales reached 1,000 tonnes (old crop) last week, compared with estimates for 1,000 to 6,000 tonnes.

Malaysian palm oil futures closed higher overnight, following the rally in U.S. soyoil.

Estimated volume was moderate. In soybeans, an estimated 71,644 futures and 22,022 options traded. Soymeal volume was pegged at 27,167 futures and 3,710 options. Estimated soyoil trade was 32,544 futures and 5,881 options.

Winnipeg Commodity Exchange canola futures closed higher on Thursday, influenced by strength in allied U.S. soy futures, traders said.

"We were dragged along with Chicago prices. Exporters were probably among the best buyers today," one canola trader said.

Light hedge selling in the last half of the session capped upward momentum, the source added.

Canola ended $2.60 to $4.30 per tonne higher, with November <RSX5> up $2.90, or 1 percent, at $300.80. January <RSF6> settled up $2.60 at $307.90.

Volume was estimated by the exchange at 3,924 contracts, up from 1,165 on Wednesday.

An estimated 290 November/January spread traded between $7.30 and $7.90, while some 400 November/March traded at $14.50 to $15.00, traders said.

Chicago Board of Trade soybean futures set the firm tone, with nearby contracts surging about 1.5 percent on forecasts for a return to warm and dry weather in the U.S. Midwest soy production area.

WCE feed grain futures settled higher in light volume, following the firm trend in CBOT corn and wheat futures, traders said.

October barley <ABV5> closed up $1.30 at $122.30 per tonne. Barley volume was estimated at 133 contracts, down from 219 on Wednesday.

October feed wheat <WWV5> ended 40 cents higher at $103.50 per tonne, with December <WWZ5> up 40 cents at $108.00.

Feed wheat volume was estimated at 78 contracts, down from 98 on Wednesday.

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