In The News - 26/10/2005

KUALA LUMPUR, Oct 26 (Reuters) - Malaysian crude palm oil futures were a touch softer at Wednesday's close after tracking

a fresh drop in rival U.S. soyoil.

Trade was also thin -- less than a quarter of that seen on a typically busy day -- as players avoided major transactions ahead of long holidays in the week ahead.

The market will be closed for three days next week to mark the Hindu Diwali and Muslim Eid al-Fitr festivals.

The benchmark third-month January crude palm oil contract <KPOF6> on Bursa Malaysia Derivatives closed down 3 ringgit at 1,418 ringgit ($376.13) a tonne, after touching an intraday low of 1,415.

The broader market was down 1 to 3 ringgit <0#KPO:>.

Overall volume was 1,396 lots of 25 tonnes each, compared with Tuesday's 4,242 lots.

The market can easily see 6,000 lots or more on a busy day, but traders are not expecting that to happen this week as players turn cautious ahead of next week's holidays.

"People are hardly doing anything," said a trader. "If anything, they're reacting to soyoil. That's all."

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

Soyoil prices have been volatile lately as the commodity is increasingly viewed as an energy product for biofuel, rather than as a traditional source of food. In recent days, CBOT soyoil has closed up in formal Chicago trading, only to slip into profit taking in after-hours electronic trade.

Wednesday's trend was similar. December soyoil, which had closed up 0.02 cent the day before, fell 0.11 cent to 23.67

cents a lb in electronic trade <ZLZL5>.

Soybean futures at the Chicago Board of Trade fell on Wednesday, setting back from this week's technical bounce, with weakness in soyoil contributing to the sell-off, along with fears about feed demand as bird flu spreads, traders said.

"Something that is continuing to hang over the market, which seems a little strange because meal isn't getting hit the hardest, is the continued concern over avian flu ... it's keeping people from aggressively bidding for meal," said one CBOT cash-connected trader.

November soybeans <SX5> closed 6-1/2 cents lower at $5.71-1/2 per bushel and January <SF6> was 6-3/4 down at $5.83-1/2.

The soy products were also weaker, with December soymeal <SMZ5> $1.60 lower at $169.30 per ton and December soyoil <BOZ5> 0.25 cent lower at 23.53 cents per lb.

Volume was moderate, with an estimated 74,020 soy futures and 16,145 options traded. Soymeal volume was pegged at 20,074 futures and 3,324 options. Estimated soyoil volume was 22,519 futures and 3,984 options.

Funds sold 2,500 soybean lots, 1,000 soymeal and 1,000 soyoil, traders said.

Softer crude oil markets contributed to the sell-off, with funds liquidating long positions, especially in soyoil, traders said. Funds were aggressive buyers of soyoil in October, which was tied to outlooks for more demand for renewable fuels like soy-based biodiesel.

The drop in soymeal was more psychologically negative at this point, traders said. But fears continued to surface that the deadly bird flu would cut use of soymeal, a major poultry feed. China and Europe are grappling with the H5N1 avian flu virus that can be fatal to birds and humans. In Europe, consumption of poultry has fallen as much as 30 percent.

The day's move preceded first notice day for November deliveries on Monday. There were expectations that they could be large, as it was more attractive to deliver soybeans to the board. Firms were also rolling their November positions to deferred contracts.

Harvest of a big U.S. soybean crop loomed over prices, especially with exports lagging last year's pace. Chinese interest in U.S. soybeans continues to surface but demand was viewed routine at current levels, traders said.

The U.S. soy harvest was wrapping up, helped by clear weather forecast this week.

Conditions should be dry during the next five days across the Midwest, with temperatures turning warmer by Thursday, Meteorlogix weather service said on Wednesday.

Midwest basis bids for soybeans were firm early Wednesday amid a lack of fresh farmer sales.

The U.S. Census Bureau will release its September crush data on Thursday, with analysts expecting a monthly crush of around 134 million bushels, compared with 130.34 million in August.

The U.S. soymeal/hull meal stocks average estimate was 274,700 tons, up from 238,254 tons in August. U.S. soyoil stocks as of the end of September were seen at 1.635 billion lbs. -- above the U.S. Agriculture Department's 2004/05 U.S. stocks estimate of 1.571 billion lbs. for the marketing year that ended Sept. 30.

Malaysian palm oil futures closed weak overnight, tracking a fresh drop in rival U.S. soyoil.

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