In The News - 26/08/2005

ROTTERDAM, Aug 25 (Reuters) - Business on the European vegetable oil market [OILS/E] was confined to some liquidation in palm oil on Thursday as weaker futures markets dampened buying enthusiasm, market sources said.

"With Malaysia and Chicago well down and little fresh supporting news buyers were mostly holding back. We saw a little sell off in the palm oil sector while liquids and laurics remained untraded," one broker said.

Palm oil was offered $2.50 to $5 down from Wednesday after Malaysian palm oil futures <0#KPO:> closed 14 to 20 ringgit per tonne down on liquidation, a weaker rupiah and unimpressive Malaysian palm oil exports for August 1-25.

Palm olein traded at $397.50 a tonne fob Malaysia for

September delivery and Oct/Dec traded from $397.50 down to $395 a tonne fob, down $2.50 from Wednesday.

September shipment crude palm oil traded $5 lower at $395 a tonne cif Europe and Jan/March fetched $420 and $417.50 a tonne.

Liquid oils remained featureless with EU soyoil offered up to $8 a tonne lower following CBOT soyoil futures <0#3BO:> and EU rapeoil slightly up, but bids were scarce and no trades were reported, dealers said.

Lauric oils were mostly flat to $2.50 a tonne down with liquids and palm oil, but buyers were holding back waiting for a bottom and no trades were reported, dealers said.

Malaysian palm oil dived for a second straight day on further liquidation of long positions, and selling by those fearing more competition from Indonesian palm products as the rupiah weakened.

A soft soyoil futures market in Chicago, unimpressive export estimates of palm oil for August 1 to 25 from cargo surveyors, and a bearish supply-demand survey by Reuters for palm oil in August, were other factors for the decline.

The third-month crude palm oil futures contract on Bursa Malaysia Derivatives, November <KPOX5>, ended 15 ringgit down at 1,365 ringgit ($364) a tonne. It has lost 28 ringgit, or two percent, since Wednesday.

The broader futures market <0#KPO:> fell 14 to 20 ringgit on Thursday. Volume totalled 5,738 lots of 25 tonnes each, about 80 percent than Wednesday's trade. 

November saw an intraday low of 1,363 ringgit a tonne. 

Dealers expected it to find immediate support at between 1,360 and 1,355 ringgit.

"But we could also see a free fall," said one trader. "People have been waiting to sell and are finding the excuse now from the weakening rupiah and the poor outlook for palm oil despite the approaching peak period for demand."

The rupiah <IDR=> hit new 3-½ year lows of 10,255 to the dollar on Thursday. It fell to 10,300 a day earlier, in one of its biggest single-day drops since May 2004.

A weaker rupiah makes palm oil exports from Indonesia more competitive against those of Malaysia.

Malaysia is the world's largest palm oil producer and exporter, while Indonesia ranks second.

Soyoil futures on the Chicago Board of Trade extended Wednesday's losses in Thursday's electronic trade <0#ZL:>, with deliveries for September and December sliding an additional 0.05 and 0.07 cents a lb, respectively.

Societe Generale de Surveillance (SGS), the leading tracker of Malaysian palm oil shipments, said exports for August 1 to 25 were estimated to have grown 10 percent from July 1 to 25.

"That's no growth if you ask me," said another trader. "They reported better percentages earlier."

SGS had estimated a rise of 12 percent for Aug. 1 to 20 shipments, 17 percent for Aug. 1 to 15, and 19 percent for Aug. 1 to 10.

Dealers had expected a steady growth in demand for palm oil as they approached September -- a month which usually saw huge buying from clients in Pakistan, India and the Middle East for festivities that stretched till November.

EXPORTS THINNING, OUTPUT RISING

While the picture for exports weren't exactly rosy, production, in contrast, was steadily climbing, according to a Reuters survey on Thursday.

August production of palm oil in Malaysia is expected to rise 2.5 percent over July, helped by steady rains and the dispersion of a smog from Indonesian forest fires that briefly hit output, said analysts from five plantations involved in the survey.

Dealers had initially thought production would drop three to five percent in August after the haze enveloped large parts of central Malaysia, forcing the government to declare a brief emergency that stopped or slowed work at plantations.

But with rains and change in wind direction having scattered the pollution -- and an international firefighting team ready to douse new hotspots that show up on Indonesia's island of Sumatra -- impact on Malaysia's production has been limited.

($1=3.75 ringgit)

Soy futures at the Chicago Board of Trade fell 2-1/2 percent on Thursday, notching six-month lows with crop-enhancing weather and findings this week of solid soy yield potential in the heart of U.S. soy country hitting prices, traders said.

"The Pro Farmer tour still seems arguing a little bit better yields rather than a little bit smaller, so we'll have to see what they put out for a final number," said Dan Cekander, analyst for FIMAT Futures.

CBOT soy closed 7-1/2 to 15-1/2 cents per bushel lower.  September <SU5> was down 15-1/2 at $5.87 per bushel. New-crop November <SX5> was down 15 at $5.97-3/4.

New contract lows were set in the August and September 2006 contracts. Traders said sell-stops were triggered when November broke support at $6.00 per bushel.

Volume was estimated by the CBOT at 71,129 futures and 33,690 options.

Crop scouts on the John Deere Pro Farmer crop tour of the  Midwest said on Thursday that yield potential in south-central Iowa was below average but above average yields were seen in northeast Iowa. Potential yields in southwestern Minnesota were above average.

Earlier this week the tour was reporting good yields in the west and poorer prospects in the east, especially in Illinois, as expected.

Pro Farmer is expected to release an estimate for U.S. corn production late on Friday.

August weather that has been conducive to soy pod setting and pod filling was a key fundamental reason for declines in soybean futures, traders said.

"They added 10 percent coverage of rain in the corn belt  now, which gets it up to 60 now, including the dry areas in northern Illinois," Cekander said.

Meteorlogix weather early Thursday said showers would move through the western Midwest Thursday and Friday and it will be dry on Saturday. Showers were expected in the eastern Midwest overnight Thursday and continuing through early Saturday. Temperatures will be normal to above-normal over the next several days, Meteorlogix said.

Some minor underlying support may have stemmed from USDA's export sales report.

USDA early Thursday said export sales of U.S. soy last week totaled 621,000 tonnes (old-crop and new-crop combined). That's above trade estimates for 325,000 to 575,000 tonnes.

The Census Bureau's July crush report released early Thursday was neutral to mildly bearish for soy futures. Census pegged July crush at 140.155 million bushels, below an average of analysts' estimates for 140.7 million.

Exports were quiet overnight and cash basis bids for soybeans in the Midwest were steady to firm at interior locations but weak at river gathering points.

Technical support in the November contract at $6.07 per bushel was broken, driving the contract to a session low of $5.95-1/2. Resistance was at $6.15-1/4. The nine-day relative strength index for November closed Thursday at 24, below the benchmark 30 level that technical traders view as an oversold mark.

Soymeal closed 50 cents to $4.60 per ton lower following the sliding soy with further weight on the market from the Census Bureau's July crush report.

September <SMU5> was down $4.60 at $183.70 per ton.

"The crush report was bearish with the high oil and meal stocks," Cekander said.

Census pegged U.S. soymeal stocks at the end of July at 382,145 tons, above an average of analysts' estimates for 315,000 tons.

USDA early Thursday said U.S. export sales of U.S. soymeal last week totaled 116,000 tonnes (old-crop and new-crop combined). That's above trade estimates for 50,000 to 100,000 tonnes.

Soyoil was 0.35 to 0.44 cent per lb lower amid the fall in soybeans along with weight from the Census Bureau's July crush report.

September <BOU5> was down 0.44 at 22.06 cents per lb.

USDA early Thursday said U.S. export sales of U.S. soyoil last week totaled 4,000 tonnes (old-crop and new-crop combined). That's within the range of estimates for 1,000 to 5,000 tonnes.

Census pegged U.S. soyoil stocks at the end of July at 1.961 billion lbs, above an average of analysts' estimates for 1.867 billion.

Soymeal volume was estimated at 33,355 futures and 4,393 options. Soyoil volume was estimated at 29,659 futures and 2,796 options.

Malaysian palm oil futures closed lower overnight. Traders in Kuala Lumpur said palm dived for a second straight day on further liquidation of long positions, and selling by those fearing more competition from Indonesian palm products as the rupiah weakened.

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

Winnipeg Commodity Exchange canola futures slid to new six-month lows on Thursday in sympathy with U.S. soy losses and ahead of a Statistics Canada report that traders said they expect will confirm large crops.

Canola ended $2.70 to $5.20 per tonne lower, with November <RSX5> down $5.20 at $270.50 and January <RSF6> down $4.90 at $278.90.

Volume was estimated at 7,134 contracts, up from a total of 4,036 on Wednesday.

The selling was driven by losses in the Chicago Board of Trade soy complex, where good crop weather and strong yields on a U.S. Midwest crop tour  weighed on the market, prompting heavy fund selling.

Funds were also seen selling canola, traders said, with estimates of the net fund position ranging from 3,200 to 4,000 short.

Some stops were hit as canola broke through technical support at $275.00 and psychological support at $270.00. November hit a low of $269.60 late in the session.

Commercials and crushers were noted sellers, but farmer selling was restrained, traders said.

"I don't know what they're waiting for," a canola trader said, noting harvest pressure is expected to drive down futures in coming weeks.

Scale-down Japanese buying and other exporter-related buying and short covering provided some support.

Statscan was slated to release production estimates on Friday at 8:30 a.m. EDT (1230 GMT).

Trade estimates ahead of the report ranged from 7.6 million to 9 million tonnes, with an average of 8.4 million tonnes.

An estimated 1,417 November/January spread traded between $8.30 to $8.60, with 162 November/March between $15.80 and $16.40, and 67 January/March between $7.60 and $8.00.

In canola options, 500 January $270 puts traded at $10.00.

($1=$1.19 Canadian)

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