In The News - 04/08/2005
Malaysian crude palm oil futures rebounded on Wednesday, helped by a rally in rival U.S. soyoil, but gains were capped by worries about rising supply.
"Despite the strong gains in soybean oil, palm oil is not moving as much because stocks are expected to build up again.
Production is going up while exports are coming off," said a trader, pegging strong resistance at 1,400 ringgit a tonne.
The
benchmark third-month crude palm oil futures contract on Bursa
Malaysia Derivatives, October <KPOV5>, ended up 10 ringgit
at 1,366 ringgit ($364.66) a tonne.
Other
traded months <0#KPO:> settled up 7 to 12 ringgit.
Overall volume was a thin 2,811 lots, half of Tuesday's 5,709 lots.
The
benchmark contract fell 12 ringgit on Tuesday after the country's
recently de-pegged currency strengthened against the
dollar.
The ringgit <MYR=> was little changed at 3.7460 per dollar on Wednesday. It has risen 1.4 percent since Malaysia ended a seven-year peg of 3.8 to the dollar and floated the currency on July 21.
Palm oil is exported in dollars. But its futures prices, which also determine export 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.
Traders said they expected the futures market to remain under pressure in the near term as stocks of palm oil were expected to rise in July due to higher output and a drop in exports.
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 the market is now talking of 5.0 percent growth.
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.
On the Chicago Board of Trade on Tuesday, August soyoil <BOQ5> jumped 0.94 cent to 25.02 cents per lb, lifted by concerns about the U.S. soybean crop amid forecasts for warm, dry weather in August.
Soy and palm compete for export markets and their prices often move in step.
Soybean
futures at the Chicago Board of Trade closed lower on Wednesday on fund selling
and updated forecasts adding moisture to the U.S. Midwest, traders said.
Locals
were sellers early in the session, while fund selling accelerated late in the
day after updated maps showed increased potential for rain in the central and
southern Midwest this week and next. That could help alleviate stress as the
region's soybean crop continues to set and fill pods.
Traders
said soybeans would remain choppy and occasionally volatile in a Midwest weather
market.
CBOT
soybeans closed 5 to 25 cents per bushel lower. August <SQ5> was down
19-1/2 cents, or 2.8 percent, at $6.70 per bushel. New-crop November <SX5>
was down 23 cents, or 3.3 percent, at $6.81-1/2.
Traders
noted technical weakness in the inability of the November contract to top
Tuesday's high of $7.09 or the July 26 high of $7.11.
Funds
sold 4,000 lots, traders said.
Volume
was estimated by the exchange at 70,706 futures and 28,710 options.
A.G.
Edwards analyst Bill Nelson said updated versions of the American forecasting
model shifted the track of a storm in the Midwest late next week. The storm had
previously been expected to bring rain to the northern belt, including Minnesota
and Wisconsin, next week.
"The
update at noon today had it farther to the south, bringing the potential for
some good rain toward Iowa, northern Missouri, central Illinois -- the latter
two being areas that are desperately in need of rain," Nelson said.
The
Meteorlogix weather service said earlier that hot and dry weather would prevail
in the Midwest on Wednesday. Showers may move into the northwest and southeast
overnight through early Friday, and mainly dry weather is expected Friday
through the weekend, Meteorlogix said.
Soil
moisture for filling corn and soybeans is being depleted, except in northern
Iowa and southern Minnesota, Meteorlogix added.
Forecasts
for this year's U.S. soy production were beginning to surface.
Commodity
brokerage firm FC Stone on Tuesday estimated this year's U.S. soy crop at 2.814
billion bushels, slightly below the U.S. Agriculture Department's current
forecast for 2.890 billion. The next USDA crop report will be released Aug. 12.
Also,
the soybean market remains on edge because of the potential threat this season
of Asian soy rust disease.
Four
"rust-like" spores were found in a trap in Champaign County, Illinois,
a USDA Web site said on Tuesday. But the sample was too small to confirm whether
the spores are soybean rust disease, the site said.
Exports
were quiet overnight and deliveries on the August contract were modest at 299
lots. An R.J. O'Brien customer stopped all of the soy and a Tenco customer was a
noted poster of 108 lots.
Registrations
with the CBOT dropped to 1,698 lots from 1,716 lots and cash basis bids for soy
in the Midwest late on Tuesday were firm amid slow farmer selling.
Soymeal
closed $5 to $8 lower with the market choppy amid the volatility in soybeans.
August <SMQ5> ended down $4.60 at $210.80 per ton.
Funds
sold 3,000 to 4,000 contracts, traders said.
Soymeal
volume was estimated at 26,178 futures and 4,217 options.
There
were no deliveries against the August and no soymeal was registered with the
CBOT.
Soyoil
settled down 0.32 to 0.74 cent per lb., with August <BOQ5> down 0.72 at
24.30 cents per lb. Traders said soyoil was hit by profit-taking after the
recent strong gains.
Funds
sold 3,000 to 4,000 soyoil contracts, traders said.
Soyoil
volume was estimated at 25,887 futures and 3,069 options.
Deliveries
on the August totaled 929 lots and a Tenco customer was the noted issuer of 500
lots. There was strong commercial stopping of the soyoil, with the Bunge house
account taking 444 lots.
Registrations
with the CBOT were unchanged at 2,480 lots.
Malaysian palm oil futures closed firm. Traders in Kuala Lumpur said palm was helped by a rally in rival U.S. soyoil, but gains were capped by worries about rising supply.
(All
prices in Canadian dollars unless noted)
Canola futures on the Winnipeg Commodity Exchange ended lower on Wednesday, pressured by huge crop estimates from the province of Saskatchewan and by weaker Chicago soy futures, traders said.
November canola <RSX5> closed $5 per tonne, or 1.6 percent, lower at $298.40, with January <RSF6> down $6 at $306.30.
Saskatchewan, the largest canola-growing province, released a crop report late on Monday that pegged canola production at 4.15 million tonnes, up 43 percent from last year and up 51 percent from the 10-year average.
"They're going to have record yields, record production, record everything," a canola trader said. "There's going to be a glut of grain around."
The
news weighed on the canola market from the opening.
Better weather and fund selling pressured Chicago Board of Trade soy futures, which accelerated canola's losses, traders said.
Farmers, commercials and small speculators were seen selling the market, with scale-down exporter buying related to Japanese and Mexican sales providing some support.
Volume was estimated at 4,598 contracts, up from a total of 3,885 on Tuesday.
An estimated 700 November/May spread traded at $21, representing about 75 percent of full carry, with exporters seen buying the spread to cover recent sales, traders said.
For More Inquiries:
Our e-mail
: [email protected]