In The News - 08/08/2005

Malaysian palm oil futures surrendered earlier gains and closed lower on Friday, as weakness in rival soyoil and the ringgit's recovery from one-week lows weighed on the market.

The benchmark third-month palm oil contract on Bursa Malaysia Derivatives, October <KPOV5>, ended down 8 ringgit at 1,344 ringgit ($358.4) a tonne, after trading as high as 1,358 ringgit in the morning.

Other traded months settled 6 to 12 ringgit lower.

Overall volume stood at 3,162 lots, down from Thursday's 5,647.

Dealers said prices, which on Thursday hit their lowest level since February 22, could remain under pressure through next week due to fears of an increase in palm oil production and slackening demand.

The government-run Malaysian Palm Oil Board is due to release next Wednesday official production, exports and closing stock

numbers for July.

Two independent shipping surveyors will issue on the same day export estimates for the first 10 days of August.

Palm oil prices had risen in the morning after the Malaysian currency fell to a one-week low of 3.7580 against the dollar. The ringgit later bounced back to 3.7505, compared with 3.7450 at the close of Asian trading on Thursday.

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

A weaker ringgit makes palm oil exports more competitive and gives traders the flexibility of raising prices.

September soyoil futures on the Chicago Board of Trade fell 0.05 cent per lb in Friday's electronic session <0#ZL:>,

extending Thursday's 0.19 cent drop.

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

Soybean futures at the Chicago Board of Trade plunged to 2-1/2-month lows early on Friday on fund selling and closed lower but above the day's lows on a late bout of short-covering, traders and analysts said.

"We got hit through most of the day on long liquidation, we hit some technical points and there was big fund selling throughout the day," said Don Roose, president and analyst for U.S. Commodities in Des Moines Iowa.

Soy closed 9 to 13-3/4 cents per bushel lower. New-crop November <SX5> was down 13-1/2 at $6.69.

Volume was estimated by the exchange at 90,327 futures and 40,764 options.

Some forecasts for potential rains late next week and increasing margins to trade soybeans weighed on the market throughout the session, but soy showed some buoyancy near the close.

"I think we got close to some objectives on the downside. There was a gap in November beans at $6.46-3/4, and we got close to those areas," Roose said. "I think the weather forecast is for the most part still drier for the six-to-10-day, so I think people concerned about the weather saw some short-covering on the close."

Traders also said soy was pressured by trade reports that Informa Economics pegged 2005 U.S. soybean production at 2.813 billion bushels. They said the market had expected Informa to release a lower production number.

The U.S. Agriculture Department's August crop report will be released early next Friday.

CBOT floor traders said some meteorologists were issuing forecasts for rain next week in the U.S. soy growing region, but there also were outlooks for weather that will continue stressing the crop.

Hot and dry conditions will linger in the U.S. Midwest into next week, further stressing corn and soybean crops now in their key growth stages, a private forecaster predicted Friday.

"I have never seen, in my 20 years of doing this, such a persistent dry pattern across a significant portion of the Midwest," Meteorlogix forecaster Mike Palmerino said.

Recent volatility in soy futures prompted the CBOT to increase to $2,498 per contract the initial margin to trade soy, from the previous $2,295. The change takes effect with the close of business on Friday.

Exports were quiet overnight. Deliveries on the August contract were light at only one lot and registrations with the CBOT sagged to 1,532 lots from 1,641.

Cash basis bids for soybeans in the Midwest were firm at Midwest river locations and mostly steady in the interior amid slow farmer selling.

Soymeal closed $3.50 per ton lower to $2 higher, following soybeans in a nervous weather market. September <SMU5> soymeal closed down $2.30 at $208.80 per ton.

Soymeal volume was estimated at 38,714 futures and 2,427 options.

There were no deliveries on the August contract and there was no soymeal registered with the CBOT.

Soyoil closed 0.42 to 0.60 cent per lb. lower, with September <BOU5> down 0.52 at 23.69 cents per lb.

Soyoil volume was heavy, estimated at 47,465 futures and 3,867 options.

Soyoil was hit on spillover selling from the sharp decline in soybeans. Added pressure stemmed from an increase in soyoil registrations with the CBOT.

Deliveries on the August contract totaled 604 lots amid strong commercial stopping. The Bunge house account took 317 lots and an LBS customer stopped 247 lots. Registrations with the CBOT increased to 2,934 lots from 2,480.

Malaysian palm oil futures closed lower. Traders in Kuala Lumpur said palm was pressured by weakness in rival soyoil and the ringgit's recovery from one-week lows.

(All prices in Canadian dollars unless noted)

Canola futures on the Winnipeg Commodity Exchange hit five-week lows on Friday in sympathy with losses in U.S. soy futures and on commercial and hedge selling, traders said.

November canola <RSX5> settled $6.70 per tonne, or 2.3 percent, lower at $287.10, with January <RSF6> down $5.60 at $296.10.

Volume was estimated at 8,185 contracts, up from a total of 6,031 on Thursday. 

The market opened lower, following Chicago Board of Trade soy futures, which were hit by fund selling and better weather

forecasts.

Technical momentum in CBOT soy drove canola lower, with commercials and funds willing to take short positions on expectations that soy weakness will continue next week, traders said.

Earlier in the session, November canola touched a low of $285.40, representing a 6 percent slide from the week's highs, set on Tuesday.

The market has been pressured by expectations of a bumper canola crop, fueled by projections from Saskatchewan's agriculture department late on Tuesday.

Farmer selling has picked up on concerns about bin space and worries that prices could slide further, traders said.

Scale-down Japanese buying and crusher and Australian short covering provided some support under the market. Funds were

seen on both sides of the market.

An estimated 402 November/January spread traded between $7.60 and $8, with 400 November/March at $21.

Mainly hot, dry weather was forecast for the Prairies for the weekend, Environment Canada said. Temperatures were forecast to cool down next week.

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