In The News - 10/08/2005

Palm oil is likely to increase its share of the global edible oil market in 2005/06 while the overall market is likely to remain in surplus, Hamburg-based newsletter Oil World forecasts.

Global production of the eight main edible oils in October 2005/September 2006 is likely to rise to 112.04 million tonnes from 106.87 million tonnes in 2004/05, Oil World forecasts.

This would be above estimated 2005/06 global consumption of 111.60 million tonnes, up from 105.79 million tonnes in 2004/05.

Of this, 2005/06 palm oil consumption is likely to increase to 34.08 million tonnes from 32.05 million tonnes in 2004/05.

This would put palm usage only slightly behind estimated 2005/06 soyoil consumption of 34.32 million tonnes, up from 32.40 million tonnes previously.

But it warned palm oil prices would have to remain competitive to achieve increased sales.

"Palm oil demand has shown high price sensitiveness in several key markets," it said. "The expansion of the palm oil share in the last six seasons was favoured by gradually rising price discounts, particularly against the major competitor soybean oil."

"However, as soon as the price competitiveness of palm oil had fallen much below average, its market share declined or only stagnated."

The Chicago Board of Trade soybean futures market closed sharply lower on Tuesday, sliding through its 100-day moving average, pressured by outlooks for much-needed rain to move through the U.S. Midwest crop region, traders said.

August soybeans <SQ5> closed 17-1/2 cents per bushel lower at $6.43. New-crop November <SX5> settled 18 cents down at $6.52-3/4 -- after gapping lower on the open. November fell 28-3/4 cents to a session low of $6.42, sliding below its 100 MA of $6.60-1/4.

"We might very well have seen our harvest lows today. The change in the weather forecast, the market kind of overreacted to it," said Anne Frick, oilseed analyst with Prudential Securities.

"I originally thought that there was a chance that we could sell off on Friday after the USDA report ... given the action today I think maybe this was more like what I was actually expecting on Friday," Frick added.

There was a chance of scattered showers at midweek in the northern portion of the western Midwest, Meteorlogix weather said early Tuesday. It will be mostly dry in the eastern Midwest Tuesday through Thursday, with a chance of showers on Friday and Saturday. But temperatures will be hot, with highs in the upper 80s to mid-90s Fahrenheit.

August is the critical period for the U.S. soybean crop as it sets and fills pods. Last week's hot, dry spell took its toll on soybeans, with condition ratings dropping by 3 percentage points.

The U.S. Department of Agriculture said late Monday that 51 percent of U.S. soybeans were in good to excellent condition, down from 54 percent last week. Traders expected condition ratings to fall 1-3 points.

Technical weakness, sparked by wetter weather outlooks, prompted funds to liquidate long positions, traders said.

Firms were also evening positions before the August crop report on Friday -- USDA's first estimate of the U.S. soybean crop based on a survey, and traders anxiously awaited the projections. An average of analysts' estimates surveyed by Reuters for the U.S. 2005 soy crop was 2.804 billion bushels, compared with USDA's July estimate of 2.89 billion.

Traders estimated that funds sold 6,000-7,000 soybean contracts, 2,000 soymeal and 5,000 soyoil. Commercials were buyers of soybeans and soyoil.

Export sales were slow. But there was fresh interest as cheaper ocean freight and firmer South American soy values made U.S. offers for October/November/December delivery competitive with South America, floor traders said.

There were no deliveries on the August soy contract and registrations with the CBOT were at 1,477 lots, down from the previous 1,499 lots.

Midwest cash basis bids for soybeans were weaker at river terminals due to rising barge freight, while bids at interior locations were steady to firm amid quiet sales.

The soymeal and soyoil markets were lower following the weakness in soybeans. August soymeal <SMQ5> closed $4.30 per ton lower at $207.40 and August soyoil <BOQ5> was down 0.64 cent per lb. at 22.80 cents. The August soy crush was up 1 cent at 64.07 cents per bushel.

Also pressuring soymeal values were softer U.S. cash markets stemming from weak demand.

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

Deliveries on the August soyoil contract totaled 38 lots with the ADM house account issuing 21 and a Dorman Trading customer posting 17. The key stopper was an LBS customer taking 26 lots.

Soyoil registrations with the CBOT were unchanged late Monday at 2,934 lots.

Malaysian palm oil futures closed firm overnight. Palm gained as short-covering reversed early losses and snapped a three-day drop in prices, traders in Kuala Lumpur said.

Volume was moderate. Estimated soybean volume was 63,413 futures and 35,385 options. Soymeal trade was pegged at 24,266 futures and 1,068 options. Soyoil volume was seen at 32,143 futures and 3,083 options.

 (Note: all prices in Canadian dollars unless noted.)

Winnipeg Commodity Exchange canola futures closed lower on Tuesday, influenced by a steep drop in allied U.S. oilseed futures, traders said.

Hedge-related selling also weighed on canola, reflecting active cash sales by producers ahead of the harvest.

"The farmer is definitely selling a lot of old-crop canola right now," one canola trader said.

Exporters were buyers, possibly covering recent business.

November canola <RSX5> closed down $4.10 per tonne, or 1.4 percent, at $284.50. January <RSF6> closed down $3.70 at $292.70.

The November/January spread traded between $7.60 and $8.10. 

The January/November 2006 spread traded lightly at $28. Volume was estimated by the exchange at 6,434 contracts, up

from 4,883 on Monday.

Chicago Board of Trade soybean futures led the way down, tumbling at the opening bell on forecasts for beneficial rain to move through the U.S. Midwest late this week. New-crop November soybeans <SX5> fell 2.7 percent, or 18 U.S. cents, to close at US$6.52-3/4 per bushel.

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