In The News - 22/09/2005

Malaysian palmoil closed down on Wednesday, surrendering early gains, as players cut back on positions ahead of key export numbers due next week.

The benchmark third-month palm oil contract on Bursa Malaysia Derivatives, December <KPOZ5>, closed down 2 ringgit a tonne at 1,424 ringgit ($377.80) a tonne. At the mid-session, the contract had stood up 4 ringgit.

"People are waiting for the full-month export numbers, and I think that's why some caution has set in," said a trader. 

The market had risen 2 percent in the previous two sessions on expectations that exports for September would do far better than August after key buyer India cut its base import prices for palm oil.

Societe Generale de Surveillance (SGS), the leading independent surveyor of Malaysian palm oil exports, said on Tuesday it tracked 782,157 tonnes of shipments for Sept. 1 to 20, up 9 percent from a month earlier.

On September 26, SGS will announce estimates for the whole of September.

September is traditionally one of the busiest periods for trade in Malaysian palm oil, when Pakistan, the Middle East and India import more to make special food and cakes for the Muslim Ramadan and Hindu Diwali festivals in November.

Overall volume in palm oil futures stood at 8,158 lots of 25 tonnes each, up from Tuesday's total of 7,406 lots. The market typically sees 6,000 lots or more on an active day.

($1=3.7692 ringgit)

Soybean futures at the Chicago Board of Trade climbed on Wednesday on the coattails of the soyoil market, which followed moves in the energy market amid rising demand for biodiesel, traders said.

"Obviously the soy complex, at least soybean oil, is trading like an energy contract and that's helping beans despite all the talk that the crop is getting bigger, so these are interesting times," said Steve Freed, analyst with ADM Investor Services.

November soybeans <SX5> closed 5-3/4 cents per bushel higher at $5.77-3/4, with the deferreds up 4-1/2 to 7-1/2.

October soyoil <BOV5> was up 0.47 cent per lb at 22.92 cents and December <BOZ5> was 0.51 higher at 23.21 cents.

About 90 percent of U.S. biodiesel is made from soybean oil. Energy markets were hot on Wednesday with U.S. crude futures escalating over $68 a barrel as fears heightened that Hurricane Rita threatened to hammer U.S. Gulf oil facilities.

Lingering talk of fresh Chinese interest in U.S. soybeans was also supportive to futures. And there were prospects that the U.S. soybean harvest in the southern portion of the belt -- Arkansas, Missouri, southeastern Illinois and southern Indiana -- could be stalled due to fallout rains from Hurricane Rita after it hits the Texas coast on Friday.

Otherwise the Midwest should see only light, scattered showers Wednesday through Friday.

"I don't think this will cause any significant delays," said Meteorlogix forecaster Joel Burgio, referring to Midwest rains in the center of the Corn Belt.

But ongoing reports of better-than-expected yields as the Midwest harvest progresses limited the rebound in the soybean market, which neared technically oversold levels.

Midwest cash basis bids for soybeans remained weak at interior locations late Wednesday as harvest picked, but were strong at river terminals as barge freight costs eased, dealers said.

The soymeal market lost ground to soyoil, closing 60 cents higher to 20 cents down. October meal futures <SMV5> were up 30 cents at $172.60 per ton. Soft U.S. cash soymeal markets continue to loom over the market as meal supplies were expected to grow as freshly harvested soybeans move into Midwest crushing plants.

Export news overnight featured an Israeli group setting a  tender for 7,000 tonnes of U.S. soymeal. Another Israeli group said it was tendering for 7,000 to 14,000 tonnes of U.S. or South American soymeal.

Malaysian palm oil futures closed narrowly mixed overnight. Traders in Kuala Lumpur said optimism over this month's exports helped underpin prices.

Funds were net buyers of roughly 5,000 soybean lots and 5,000 soyoil. Funds were about even in soymeal, traders said.

Volume was moderate in soybeans and soymeal and heavy in the soyoil pit. In soybeans, an estimated 61,603 futures and 14,251 options traded. Soymeal volume was pegged at 28,821 futures and 1,984 options. Estimated soyoil trade was seen at 35,080 futures and 3,392 options.

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

Winnipeg Commodity Exchange canola futures ended higher on Wednesday, supported by strong U.S. soy oil futures, which spurred crusher and fund buying, traders said.

Canola settled 50 cents to $2.30 per tonne higher, with November canola <RSX5> up 70 cents at $258.40 and January <RSF6> up $2.30 at $268.00.

Canola volumes were estimated at 6,296 contracts, up from a total of 4,975 on Tuesday.

The market was buoyed by a rally in Chicago Board of Trade soybean oil. December soyoil closed up 0.51 U.S. cent per pound on Wednesday at 23.21 U.S. cents per pound.

Crushers were buyers with the gains in soybean oil, traders said. Australian short covering and routine Japanese buying was also noted.

Traders saw funds on both sides of the market. Fund short covering was seen in the nearby November contract, and some traders said they saw new fund buying in January.

The net fund short position was estimated to be 4,000 to 5,000 contracts, down slightly from 4,000 to 6,000 on Tuesday.

Commercial selling late in the session took the market off its highs, traders said, as grain companies anticipated more farmer hedging with the better harvest weather.

Environment Canada forecast light, scattered rains in parts of Alberta late on Wednesday and Thursday, and in parts of Saskatchewan on Friday.

But mild, sunny weather was forecast to prevail into next weekend.

An estimated 1,106 November/January spread traded mainly between $8.50 and $8.90.

($1=$1.17 Canadian)

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