In The News - 24/10/2005

Prices were mostly lower on the European vegetable oil market [OILS/E] due to drops in Malaysian palm oil and CBOT soyoil futures, traders said.

"Basically all products were somewhat on the defensive," one trader said.

Liquid oils were offered as much as $13 to 4 euros a tonne  lower and rapeseed oil traded at 600 euros a tonne for Feb/Mar deliveries.

Palm oil was offered $2.50 to $5 a tonne lower after Malaysian palm oil futures <0#KPO:> closed down half a percent.

Crude plam oil traded at $432.50 for Nov/Dec delivery, while palm olein changed hands at $400 a tonne for Nov, $402.50 for Dec and $405 for Jan/Mar.

Malaysian palm oil closed down half a percent on Monday, prolonging a weak trend from last week, after fresh losses in rival U.S. soyoil.

Trade was also light, with players disinclined to commit heavily ahead of next week's long holidays, dealers said.

Except for Tuesday, the Bursa Malaysia Derivatives, which trades in crude palm oil futures, will be closed the whole of next week as Malaysia celebrates the Hindu Diwali and Muslim Eid al-Fitr festivals.

"If you look at the level of open interest, you can see it's falling everyday as people are trying to get out before the holidays," said a dealer.

Open interest -- or liquidity -- in Bursa's crude palm oil futures dwindled to 25,559 lots at Monday's open, compared with Friday's 26,060 lots.

Market participants were also cautious about taking major positions ahead of Tuesday's export numbers for Oct. 1 to 25.

Two cargo surveyors watched by the market -- Societe Generale de Surveillance and Intertek Testing Services -- will release on Tuesday estimates of Malaysian palm oil shipments for the first 25 days of October versus Sept. 1 to 25.

Both have consistently estimated a thinner growth in shipments over the last fortnight compared with the first 10 days of October. Dealers expect the trend to continue.

At Monday's close, Bursa Malaysia's benchmark third-month January contract <KPOF6> was down 8 ringgit at 1,410 ringgit ($374) a tonne. It had fallen as much as 11 ringgit earlier to touch an intraday low of 1,407 ringgit.

The broader futures market was down 6 to 10 ringgit <0#KPO:>.

Overall market volume stood at 3,457 lots of 25 tonnes each, versus Friday morning's 5,872 lots. 

Dealers said the market was weighed down by the extended weakness in soyoil on the Chicago Board of Trade (CBOT).

Chicago Board of Trade soybean futures closed higher on Monday, recovering from early weakness as the market was oversold after last week's sell-off, with the turnaround in soyoil supportive, traders said.

"The rally back in oil helped. There was commercial buying late," in soybean oil, said Roy Huckabay, analyst with The Linn Group in Chicago.

Helping the soy markets to rebound were the energy markets, which came off their lows late. Soybean oil has acted more like an energy product in the past month amid outlooks for increased demand for soy biodiesel.

November soybeans <SX5> closed 2-3/4 cents per bushel higher at $5.75, dipping to key support at $5.66-1/2 early. The back months settled 2-3/4 to 6 cents higher.

December soyoil <BOZ5> settled 0.28 cent per lb higher at 23.76 cents, with the deferreds 0.27 to 0.39 firmer.

Early pressure stemmed from ideas that the U.S. soybean supply was growing due to a large U.S. soy harvest and export demand that was not meeting government projections.

The U.S. Agriculture Department reported early Monday that 32.7 million bushels of U.S. soybeans were inspected for export last week. That was within trade estimates for 27 million to 36 million, but off last year's pace. Nearly half of the shipments were earmarked for China, the world's top soy buyer.

"Exports are well behind year-ago levels. With every dip we find some demand but we have to see some something surprising to spark this market," one CBOT trader said.

U.S. soy export inspections as of Oct. 20 were nearly 114 million tonnes, down from 142.6 million a year ago.

The U.S. soy harvest was wrapping up. USDA reported late Monday that 87 percent of the soy crop was harvested, slightly ahead of trade expectations for 85 percent completion.

Meteorlogix weather said drier weather this week in the U.S. Midwest would favor harvest, despite cooler temperatures. Some rains over the Corn Belt slowed harvesting but fields were expected to dry quickly.

Midwest basis bids for soybeans were steady to firmer as farmers were light sellers as harvest was wrapping up.

Crop-friendly rains in South America were also mentioned as a bearish factor.

Safras, a Brazilian agri-consultant, on Friday estimated that Brazilian soy acres would be down 7 percent for the 2005/06 season. Even so, production was estimated at 59.5 million tonnes, up 17 percent from the year before. USDA currently estimates the Brazilian soybean crop at 60 million.

CBOT December soymeal <SMZ5> rebounded to a firm close at $169.90 per ton, up 50 cents. The back months were up 50 cents to down 40 cents.

Weakness in U.S. cash soymeal markets and worries about reduced export demand for soymeal amid the spread of the deadly bird flu loomed over prices early, traders said.

Malaysian palm oil futures closed down half a percent, prolonging a weak trend from last week, after another drop in rival U.S. soyoil.

Commodity funds were about even in soybeans, sold roughly 1,000 soyoil contracts and 500 soymeal, traders said. Commercials bought about 1,000 soyoil lots late, with Cargill and Goldenberg Hehmeyer among the buyers.

The Commodity Futures Trading Commission on Friday reported that commodity funds extended their net longs in CBOT soybean and soyoil futures/options combined as of Oct. 18.

But late last week, funds were liquidating their longs, CBOT traders said.

In soymeal, large speculators reduced their net shorts, the CFTC said.

Volume was moderate. In soybeans, an estimated 86,761 futures and 12,249 options traded. Soymeal trade was pegged at 23,847 futures and 1,947 options. An estimated 23,942 soyoil futures and 4,689 options traded.

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