Malaysian crude palm oil futures fell by midsession on Tuesday, weighed down by losses in rival U.S. soyoil and fears over mounting stocks of palm oil in the physical market.

The benchmark third-month December <KPOZ5> crude palm oil contract on Bursa Malaysia Derivatives entered the lunch break 10 ringgit lower at 1,456 ringgit ($386.08) a tonne, after trading as low as 1,454.

Other traded months settled down 7 to 12 ringgit <0#KPO:>.

Overall volume was light, at 1,132 lots of 25 tonnes each, or about a quarter of Monday's trade. The market can easily surpass 3,000 lots on a busy morning.

"We're just following soyoil this morning, but people are also worried about the growing stocks of palm oil in the market and where it's heading to," said a trader.

Stocks of both crude and refined palm oil have been on the rise in recent months, reaching a total of 1.44 million tonnes at end-September from 1.18 million at end-July, official crop data released on Monday showed.

The futures market could see heavy liquidation if inventories cross 1.5 million tonnes at end-October, dealers said. 

"The prices are holding now because of various speculative factors, but if the stocks keep growing, then pure fundamentals will have to kick in," said another trader. Soyoil futures on the Chicago Board of Trade (CBOT) fell sharply at Monday's close, following weakness in soybeans after the harvest of a big crop.

Soyoil and palm oil compete for exports and their prices often move in step.

CBOT soyoil closed down 0.22 to 0.40 cent and remained weak in Tuesday's electronic session <0#ZL:>, which precedes regular market hours in Chicago beginning at 1400 GMT.

CHICAGO, Oct 11 (Reuters) - Soybean futures at the Chicago Board of Trade rebounded on Tuesday, after a steep slide the preceding day, amid harvest of a large U.S. soy crop, traders said.

Traders were covering their short positions, with a flurry of activity on the open and near the close. But most of the session was quiet as traders were waiting for USDA to release its latest crop estimates on Wednesday.

"They're waiting to see whether there will be a 3 in front of the number," said one CBOT floor broker referring to trade expectations that the U.S. soy crop was over 3 billion bushels.

In September, the government estimated the 2005 U.S. soybean crop at 2.856 billion bushels. The larger private crop estimates reflect reports of strong harvest yields after the soybeans benefited from August rains.

An increase in soybean production was seen rolling over to the the end stocks figure. Analysts expect a U.S. end soy stocks figure near 291 million bushels, above the USDA September estimate at 205 million.

November soy <SX5> closed 8 cents higher at $5.63-1/2 per bushel, after pushing through $5.61-1/2 resistance to reach a high of $5.66-1/2.

Commodity funds bought 3,000 soy futures; Refco Investor Services and Refco each bought about 1,000 November, traders said.

Volume was heavy estimated at 93,706 futures and 30,922 options.

The market was due for a technical bounce, slipping near oversold conditions on Monday. The nine-day relative strength index for November soy closed Tuesday at 43, up from 35 on Monday. An RSI of 30 or below is viewed as a technically oversold market by chartists.

U.S. weekly export inspections for soy were supportive. USDA said on Tuesday 18.1 million bushels of soybeans were inspected for export last week, compared with trade estimates for 9.0 to 14.0 million.

The tally was bigger than expected, even with China, the top global soy buyer, not shipping any soybeans last week as the country was on a week-long holiday. However, there was talk of fresh interest in U.S. soybeans from China this week. Some traders said China may have bought 1-3 cargoes.

The U.S. Midwest soy harvest was moving along, with clear weather expected most of the this week. Mostly dry weather through Thursday was forecast for the western Midwest and clear skies over the next five to seven days east of the Mississippi River, Meteorlogix weather service said.

As expected, USDA reported that the U.S. soy harvest was 60 percent complete in its weekly crop report released late Tuesday. The report was delayed one day as government offices were closed on Monday for Columbus Day.

Midwest cash basis bids were weak on Tuesday as harvest continued. River bids were sharply lower due to high barge costs, dealers said.

The soy products followed soybeans higher on a technical recovery. October soymeal <SMV5> closed 80 cents per ton higher at $165.10, with the deferreds up 70 cents to $1.50.

Soyoil was getting an added lift from the strength in crude oil. CBOT soyoil futures have been tracking the energy markets over the past three weeks amid prospects for increased demand for substitute green fuels like biodiesel. Biodiesel is made largely from soybean oil.

October soyoil <BOV5> settled 0.33 cent per lb higher at 23.40 cents, with deferreds up 0.27 to 0.36 cents.

Malaysian palm oil futures closed weak amid fears over mounting physical stocks of palm oil, traders said.

There were no deliveries on the October soymeal contract. Registrations with the CBOT unchanged at 251 lots.

In soyoil there were light deliveries of 28 amid strong commercial stopping, with the ADM house account taking all of the soyoil.

Soyoil registrations with the CBOT were unchanged at 4,519 lots.

Trade in soyoil was heavy but thin in soymeal. In soyoil, an estimated 36,058 futures and 5,128 options traded. Soymeal volume was pegged at 16,764 futures and 1,513 options.

((Reporting by Christine Stebbins, Reuters Messaging: [email protected]; email: [email protected]; +1 312 408 8720))

Wednesday, 12 October 2005 05:34:05

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