In The News - 03/08/2005

Malaysian crude palm oil futures were down in Tuesday's morning trade as the country's recently de-pegged currency strengthened against the dollar. 

Talk of a higher-than-expected production of palm oil in July also hit sentiment, dealers said.

Five plantation firms surveyed by Reuters last week put production of palmoil in Malaysia, the world's top producer, at 3.5 percent higher in July than June due to a fresh ascent in yields.

But traders on Tuesday were talking of a 5.0 percent growth.

"It's not too good, what we're hearing," said a dealer, referring to latest rumours on production. "And the way the ringgit is steadily strengthening is making people scared."

The ringgit stood at 3.7457 to the dollar at 0530 GMT on Tuesday, up 1.4 percent since being unshackled on July 28 from its fixed value of 3.8 to the dollar for the last seven years.

Palm oil is exported in dollars. But its futures prices, which also determine exports prices, are quoted in ringgit.

A higher ringgit makes exports of palm oil more expensive, eroding their competitiveness against rivals such as soyoil. Therefore, an adjustment in futures values is necessary.

Dealers said they expected the futures market to remain under pressure in the near term as stocks of palm oil were also expected to rise in July due to a drop in exports.

Societe Generale de Surveillance (SGS), the main independent surveyor of Malaysian oil palm shipments, said on Monday exports for July were estimated at 1,055,402 tonnes, down 13.7 percent from the 1,222,636 tonnes seen for June.

At Tuesday's lunch break, the benchmark third-month crude palm oil futures contract on Bursa Malaysia Derivatives, October <KPOV5>, was down 6 ringgit at the morning's low of 1,362 ringgit ($363.62) a tonne.

Other traded months <0#KPO:> settled down 5 to 7 ringgit.

Trade in the morning was brisk, at 3,182 lots of 25 tonnes each. Volume for all of Monday was only 3,485 lots.

The October contract had earlier risen to as high as 1,375 ringgit, following rival Chicago soyoil <0#ZL:> which rebounded in Tuesday's electronic trade after Monday's lower close.

But it slid before the midday break as players noted the strengthening ringgit

.

($1=3.7457 ringgit)

Soybean futures at the Chicago Board of Trade closed sharply higher on Tuesday, lifted by concerns about the U.S. soybean crop amid forecasts for warm, dry weather in August, traders said.

"They took some of the rain out of the forecasts in the updates -- it stimulated some fund buying and it was off to the races," said Dan Cekander, analyst with Fimat Futures.

Buy-stops were hit near $6.94 per bushel in November <SX5> and another round when the market climbed about its 50-day moving average at $6.98.

New-crop November soy closed 17 cents higher at $7.04-1/2.

Front-month August <SQ5> settled 16-1/2 higher at $6.89-1/2.

Earlier in the session the Aug/Nov spread firmed, despite heavy August deliveries. There was talk that the firmness reflected a stronger bean basis. But the strength was tied to logistic hang-ups in moving grain by barge to the U.S. Gulf and not fresh export demand, floor traders said.

There were 759 soy deliveries scattered among firms, with a Refco customer posting 174. The biggest stopper was an R.J. O'Brien customer at 632. The Bunge house account stopped 92.

Registrations with the CBOT late Monday increased to 1,716 lots from 1,279.

After the markets closed the USDA announced that four "rust-like" spores were found in Champaign County, Illinois.

Because there was only four spores discovered, scientists will not be able to confirm whether or not they were Asian soy rust. But the Illinois crop is not very vulnerable to the yield cutting disease due its maturity, said University of Illinois plant pathologist Glen Hartman on Tuesday.

The market opened higher on disappointing weekly crop ratings. USDA said late Monday it rated 54 percent of the U.S. soy crop as good to excellent, unchanged from the previous week. Traders had expected the crop to improve by 2 to 4 percentage points after rains in the Midwest last week.

Forecasts for hot weather this week were also supportive, but Meteorlogix weather service predicted scattered rains in the central and eastern Midwest on Thursday.

The crop needs rain during August as it sets and fill pods, the key yielding-determining stages for beans.

USDA said 55 percent of the soy crop was setting pods, ahead of the five-year average of 44 percent.

Exports remained quiet as importers turned to Brazil and Argentina for cheaper supplies.

The day's rally triggered active farmer sales in Brazil and Argentina but U.S. country sales were slow.

Midwest cash basis bids for soybeans early Tuesday were mixed, steady to weak in the west and firm in the east, dealers said.

The soymeal and soyoil markets followed soybeans higher. August soymeal <SMQ5> closed $3 per ton higher at $215.40. The lack of deliveries since the start of the August delivery period last Friday remained supportive. But U.S. cash soymeal markets had a softer tone.

Soyoil rallied after a choppy start, recovering from its recent technical sell-off. But deliveries against the August contract weighed early. August soyoil <BOQ5> closed 0.94 cent higher at 25.02 cents per lb.

There were 261 deliveries against the August soyoil contract on Tuesday, with a Fimat USA customer issuing 127 and a Tenco customer stopping 141.

Registrations with the CBOT were unchanged at 2,480 lots.

Malaysian crude palm oil futures closed lower after the country's recently de-pegged currency firmed against the dollar. Talk of higher-than-expected July production also weighed on the market.

Commodity funds were big buyers in all three pits: buying 6,000-7,000 soybeans, 2,000-3,000 soymeal and 3,000-4,000 soyoil. Commercial activity was light, traders said.

 (All prices in Canadian dollars unless noted)

Canola futures on the Winnipeg Commodity Exchange settled higher on Tuesday, supported by crusher and exporter buying and gains in the allied U.S. soy complex, traders said.

November canola <RSX5> closed $2.90 per tonne higher at $303.40, with January <RSF6> up $2.80 at $312.30.

Volume was estimated at 3,810 contracts, down from a total of 3,893 on Friday. WCE contracts did not trade on Monday because of a Canadian civic holiday.

Crushers were noted buyers because of a drop in the Canadian dollar and sharp gains in soybean oil on the Chicago Board of Trade, traders said.

"You've got crusher buying again because crush margins did improve," a canola trader said.

Some traders thought export demand stepped away because canola lagged CBOT soy gains.

Others saw exporter buying early and at the close.

Scale-up farmer selling capped gains at the high of $304.80 per tonne, basis November.

"Crops ... are made, let's face it. It's just a matter of finishing off this weather and not getting too much heat stress here," a trader said.

An estimated 167 November2005/November2006 spread traded, mainly at $32.00.

($1 = $1.22 Canadian)

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