In The News - 19/08/2005

Malaysian palm oil rose on Thursday on the strength of rival U.S. soyoil, but dealers were not too confident of the market moving into the next key price level of 1,400 ringgit a tonne soon.

The benchmark third-month crude palm oil contract on Bursa Malaysia Derivatives, November <KPOX5>, closed the day up eight ringgit at 1,385 ringgit ($369.33) a tonne, helped by gains in Chicago soyoil.

Dealers said they expect the market to stay at around 1,370 to 1,380 ringgit in the near term, supported by steady demand and a possible drop in August production of palm oil due to fewer working days on plantations after a recent haze episode.

Thursday's high was 1,390 ringgit.

"I think 1,400 ringgit will be a bit difficult to attempt now," said a trader. "For that, we probably to need some real good export numbers and surety that the production in August won't be too high."

Prices have been on an uptrend since the government declared last week a brief emergency in two areas in the central state of Selangor -- a major oil palm-growing state -- due to haze from Indonesian forest fires.

The thick pollution in the skies had caused work to be scaled back on several Selangor plantations. 

The haze has since cleared in Selangor, after a change in wind direction and rains. But officials have warned that it could return.

An encouraging growth in palm oil exports for August is also keeping prices firm.

Societe Generale de Surveillance (SGS), the leading surveyor of Malaysian palm oil exports, said this week 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 steep declines in estimates for last month.

Production itself rose seven percent in July due to higher yields. But dealers expect a decline of three to five percent for August.

Aside from the November contract in Thursday's crude palm oil futures, the broader market was down 3 ringgit to up 16 <0#KPO:>.

Trade was, however, light at 3,000 lots of 25 tonnes each. 

The market typically sees twice as much volume on a busy day.

Soyoil futures on the Chicago Board of Trade <0#ZL:> were mostly up at Wednesday's close, rebounding from losses earlier in the week. Soyoil and palm oil compete for export destinations and the two markets often move in step.

($1=3.75 ringgit)

Soybean futures at the Chicago Board of Trade closed weak on Thursday, pressured by prospects that the U.S. soybean crop was soaking up needed moisture from rains, improving yield potential, traders said.

The lows of the day were made late in the session, after the market spent most of the day consolidating.

"We have a lot of rains across the area and over the next several days. That's keeping a lid on the market. But the six-to-10-days (forecasts) are a little drier and warmer, so that's keeping some support," said one cash-connected CBOT trader.

September soy futures <SU5> closed 5-1/4 cents lower at $6.09-3/4 per bushel. New-crop November <SX5> was 4-1/2 down at $6.20-1/4, keeping above support at $6.15-1/2, the 200-day moving average.

Volume was on the lighter side in soybeans, with most of the day's trading activity in wheat, where funds were covering their record short position in CBOT wheat futures.

"It's the first time in many, many years ... maybe decades ... that open interest in wheat is bigger than soybeans," said Vic Lespinasse, a floor broker with A.G. Edwards.

Open interest in CBOT wheat stood at 259,837 contracts as of Thursday's open, compared with 258,195 lots in soybeans.

That was a new record, based on the CBOT Web site showing the previous record at 257,460 lots, made on Aug. 1.

U.S. weekly export data gave the market early support. The U.S. Department of Agriculture said Thursday export sales of U.S. soybeans last week totaled 425,900 tonnes (old and new crop). That was above estimates for 100,000 to 250,000 tonnes.

Included in the tally was a Chinese purchase of one cargo, or 55,000 tonnes, of new-crop U.S. soybeans.

The market was due for a technical bounce, after slipping to a three-month low on Thursday. The nine-day relative strength index for the November contract <SX5> closed at 23, with a reading of 30 or lower viewed as a technically oversold market.

Midwest cash basis bids were mixed, firm in the western Midwest as processors tried to encourage movement, but weak along Midwest river locations, cash dealers said.

Soymeal and soyoil futures followed the choppy moves in soybeans. September soymeal <SMU5> closed 70 cents lower at $190.90 per ton, with deferreds down 20 cents to $1.80. September soyoil <BOU5> was down 0.09 cent per lb. at 22.51 cents per lb., with the deferreds down 0.07 to up 0.15.

The nearby spread was pressured by the softer tone to U.S. cash soymeal markets. Demand was weak, despite futures prices falling below $200 per ton this week.

Weekly export sales data for soybeans and soymeal was viewed neutral.

USDA said export sales of U.S. soymeal last week totaled 61,600 tonnes (old and new crop). That was within trade estimates for 25,000 to 100,000 tonnes.

U.S. soyoil export sales last week were 3,600 tonnes (old crop), within estimates of zero to 5,000 tonnes.

Malaysian palm oil futures closed firm overnight. Palm gained amid the strength of rival U.S. soyoil. But dealers were not too confident of the market moving to the next key price level of 1,400 ringgit a tonne soon, traders in Kuala Lumpur said.

Funds sold about 2,000 soybean contracts and were about even in soyoil and soymeal futures, traders said. Cargill Investor Services sold 1,000 November.

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

Winnipeg Commodity Exchange canola futures ended narrowly higher in range-bound trade on Thursday with support seen from export-related buying related to exports to Japan and Mexico, traders said.

Canola settled 90 cents to $2.60 per tonne higher, with November <RSX5> up 90 cents at $280.80 and January <RSF6> up $1.10 at $289.10.

"Prices didn't venture much from $280" per tonne, basis November, a canola trader said, noting a substantial portion of volume was done at that level. 

Total canola volumes were estimated at 2,788, down from 7,464 on Wednesday.

Some traders thought the exporter buying was related to old business on the books, while others felt it could be new business.

No sales could be confirmed.

The weak Canadian dollar also provided some support.

Commercials and crushers were light sellers.

Farmer selling remained light ahead of the bulk of harvest, and ahead of a weekend where some worried about low overnight temperatures.

Environment Canada had not issued frost warnings by Thursday afternoon, but overnight lows for central and southern Alberta were forecast to dip to 1 to 3 degrees Celsius (34-37 degrees F).

But forecasts for next week were for hot, dry weather, which would speed harvest, traders noted.

An early frost, like the event last year on Aug. 20, could hurt crop quality. Traders downplayed frost fears and said they were confident there was enough yield potential to make up for any damage.

An estimated 220 November/January spread traded between $8.00 and $8.30, with 143 November/March between $14.80 and $15.90.

($1=$1.22 Canadian)

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