In The News - 19/10/2005

Malaysian crude palm oil futures fell more than half percent at Wednesday's close, weighed down by thin leads and mixed prices of Chicago soyoil. The benchmark third-month January crude palm oil contract <KPOF6> on Bursa Malaysia Derivatives ended down 11 ringgit, or 0.75 percent, at 1,439 ringgit ($381.69) a tonne -- well below the 1,450 mark which had been a key support this week.

The contract fell as much as 15 ringgit earlier on Wednesday to an intraday low of 1,435.

Dealers said the market could take a further hit later in the week if performance of palm oil exports for Oct. 1 to 20 proved weaker than the first 15 days of the month.

Two independent surveyors of Malaysian palm oil exports -- Intertek Testing Services (ITS) and Societe Generale de Surveillance (SGS) -- are due to release on Thursday shipment estimates for Oct. 1 to 20 compared with Sept. 1 to 20.

Dealers said ITS's figures for Oct. 1 to 20 were expected to be around 810,000 tonnes, or about 4.5 percent higher than Sept. 1 to 20.

This compares against the growth of 8.1 percent for Oct. 1 to 15 estimated by the cargo surveyor. "This certainly doesn't look good at all," said a futures
trader. 

Aside from the January contract, other traded months for palm oil closed down 7 to 19 ringgit <0#KPO:>.

Overall market volume was 6,245 lots of 25 tonnes each, versus Tuesday's 4,870 lots. The bulk of the trade was in the afternoon.

"People wanted to clear their positions before tomorrow's export numbers," said another trader. "Some had been wanting to sell from morning, after seeing the soyoil prices." Soyoil and palm oil compete for exports and their prices often move in step. Soyoil futures on the Chicago Board of Trade ended mixed on Tuesday, after rallying sharply the day before on promises of biodiesel. CBOT's December soyoil settled up 0.05 cent at 24.44 cents a lb and the back months were up 0.13 to down 0.10 cent.

Soybean futures at the Chicago Board of Trade closed higher on Wednesday amid talk China bought more U.S. soy and on late commercial buying, traders said.

"There is some chitchat about Chinese business so there could be something along that line," said Dale Gustafson, analyst for Citigroup.

CBOT soy closed 2-1/2 to 8 cents per bushel higher, with November <SX5> up 4-3/4 at $5.89-1/4 per bushel.

The trading volume was thin, which left the market vulnerable to a rapid rally, pit sources said. Volume was estimated by the exchange at 63,594 futures and 17,972 options. Commercial trader Bunge Ltd. was a late buyer of between 200 and 300 November and Man Financial bought 200 November on buy-stops near the close, traders said.

CBOT floor traders said there was talk that China bought a cargo of U.S. soybeans overnight. China has been a fairly consistent buyer of U.S. soy.
But traders also said there was a lack of bullish momentum in soy because of the aggressive harvest of a large U.S. soy crop. Meteorlogix weather said scattered rains this week may cause harvest delays but the added moisture will favor soft red winter wheat. Major delays to the soy harvest appear unlikely.
Soybean traders and market analysts were still contending with bearish price implications from reports of bigger-than-expected yields of soy in the U.S. harvest.

USDA on Tuesday revised its estimate of corn and soybean losses from drought in the U.S. crop belt to $701 million vs. the previous $1.3 billion. USDA said the downward revision was due to very large increases in yields for corn and soy.

Exports were quiet overnight and traders said the market on an almost daily basis is dealing with talk China was seeking or may have bought U.S. soy.
Traders said soy was underpinned by overall good demand for soy and occasional short-covering bounces.

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