In The News - 18/08/2005

Malaysian crude palm oil futures ended flat on Wednesday as buyers were hesitant to commit after seeing rival soyoil making little headway in two days of trade.

Dealers foresaw palm oil prices at 1,370 to 1,380 ringgit ($365-$368) a tonne in the near term, supported by strong demand and a possible drop in August production of palm oil due to fewer working days on plantations after a recent haze episode.

But they said a correction was also likely if palm oil's price advantage to soyoil - once at $100 a tonne but now just around $40 -- declined further.

"This discount against soyoil is something very important to palm oil, particularly in the Indian market," said a trader. "If the discount gets any thinner, more Indian consumers will switch to soyoil."

Malaysia's largest buyer of palm oil only a few years ago, India has now fallen to third place, after China and the United States.

Dealers said the drop was largely due to declines in the price advantage of palm oil to soyoil.

Taxes of between 80 and 90 percent levied by India on palm oil, against a flat 45 percent imposed on soyoil, are also a reason for the steadily declining demand.

The benchmark third-month crude palm oil contract on Bursa Malaysia Derivatives, November <KPOX5>, closed at 1,377 ringgit ($367.20) a tonne, unchanged from Tuesday.

On the broader market, only two contract, for September and October, showed a rise of two to three ringgit <0#KPO:>.

Trade totalled 4,963 lots of 25 tonnes each, below the 6,000 lots typically seen on a busy day.

Dealers attributed the flay close to the dull soyoil market in Chicago <0#ZL:>. Soyoil and palm oil compete for export destinations and the two markets often move in step.

Palm oil prices hit a three-week high on Friday after the government declared an emergency in two areas of a major oil palm-growing state due to haze from Indonesian forest fires.

In an emergency, the government can order the closure of estates and factories, among other actions. 

The haze enveloping the central state of Selangor cleared after a change in wind direction, and rains, at the weekend.

But dealers remained bullish on outlook due to an encouraging trend in palm oil exports for August.

 Societe Generale de Surveillance (SGS), the leading surveyor of Malaysian palm oil exports, said on Monday it had tracked a shipment of 571,006 tonnes for August 1 to 15, up 17 percent from what it had monitored for July 1 to 15.

The cargo surveyor had reported a steep decline in estimates for July versus June.

But it reversed the trend since the start of August, putting a 19 percent rise for the first 10 days of this month compared with July 1 to 10.

Production rose seven percent in July due to higher yields. Dealers expect a decline of three to five percent for August.  In physical dealings of crude palm oil, August contract was

($1=3.75 ringgit)

Soybean futures at the Chicago Board of Trade settled mixed on Wednesday after a choppy trading session, with the November contract seeing a 12-cent range on both sides of Tuesday's close, traders said.

September <SU5> closed 1-3/4 cents lower at $6.15 and new-crop November <SX5> was down 1/4 cent at $6.24-3/4 per bushel -- falling 7 cents to $6.18 early, then rising a nickel by midday.

The deferred months settled 4 cents higher to 1 cent down.

The market was pressured early by fund-long liquidation sparked amid expectations that U.S. soybean crop conditions were improving after wetter, milder weather in the Midwest this week.

But the selling was exhausted after the November soy held support at $6.15, the 200-day moving average. By midday, soybeans rebounded about 3 to 7 cents.

"Commercial buying in oil helped. We're still in a consolidation-type pattern," one CBOT trader said.

The market was viewed technically oversold going into the session after falling to three-month lows this week. The nine-day relative strength index for the November contract closed at 25 the past two sessions. An RSI of 30 or below is an indicator of oversold conditions.

Exports overnight included news South Korea bought 25,000 tonnes of non-GMO U.S. soybeans from ADM. There was also talk of fresh Chinese interest in U.S. soybeans as new-crop U.S. values were competitive with South America, traders said.

Midwest cash basis bids for soybeans were steady to firm early Wednesday as processors tried to source beans to meet crush demands.

The soymeal futures followed the up-and-down moves in soybeans. But soyoil was firm, gaining on soymeal, amid strong commercial buying, traders said.

September soymeal <SMU5> closed $1.10 down at $191.60 per ton, with deferreds 10 cents to $1.50 lower.

September soyoil <BOU5> was up 0.31 at 22.60 cents per lb, with the deferreds 0.15 to 0.40 lower.

This week's softness in U.S. cash soymeal markets was also bearish, traders said.

Exports overnight featured news Iran bought 15,000 tonnes of soyoil from Brazil.

Malaysian palm oil futures closed flat to firm overnight, pressured by the weakness in CBOT soyoil markets, traders in Kuala Lumpur said.

Commodity funds were close to even in soybeans; sold about 300 soymeal contracts and bought 500 soyoil, traders said. There was some commercial pricing in soybeans near the day's lows.

The CBOT estimated soybean futures volume at 56,211 contracts and options at 32,439, soymeal futures at 26,160 and options at 5,892, and soyoil futures volume at 21,271 contracts and options at 4,227.

 (All prices in Canadian dollars unless noted)

Canola futures on the Winnipeg Commodity Exchange ended mixed on Wednesday, with demand from crushers supporting the market, traders said.

There was also mild support from forecasts for cold weather in central Alberta on Friday and Saskatchewan on Saturday, which raised concerns over possible crop damage by frost.

Canola ended 40 cents per tonne higher to $3 lower, with November canola <RSX5> up 40 cents at $279.90 and January <RSF6> down 10 cents at $288.

"It's going to be cold on Friday, Aug. 19," a trader said.

"Last year, we had frost on Aug. 20."

Traders said frost held out the possibility of affecting the quality of the canola crop, which is being harvested.

The early frost last year on Aug. 20 hurt the quality of the canola crop and affected some yields.

Traders said buying by crushers supported the market. Commercials were sellers. "There were light hedges," a trader said, adding that there

was some farmer selling.

"Producers are clearing their bins as the harvest gets going," the trader said, adding that locals were on both sides of the market.

Traders said there were an estimated 1,021 November/January spreads traded at between $8.10 and $8.50.

The traders said there was talk of Japan buying 3,000 tonnes of canola.

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