In The News - 09/11/2005

Malaysia's 2006 calendar-year palm oil output is forecast to rise to 15.60 million tonnes from a likely 15.14 million tonnes in 2005, Hamburg-based oilseeds analysts Oil World said in its first preliminary estimate of the country's production.

But this is a reduction in the rapid rate of growth which has seen Malaysian palm oil output rise from 13.97 million tonnes in 2004 and only 11.91 million tonnes in 2002, it said.

It expected an average fall in palm yields of two percent in 2006.

We expect output to stagnate at around 8.65 million tonnes in West Malaysia but a continued rise in Sabah and Sarawak to a combined 6.95 million tonnes in January/December 2006, up seven percent from 2005," it said.

Recent increases in Malaysia's output were largely caused by sizeable growth in the area of mature trees and record high yields, it said.

But below-normal rainfall has affected palms in January to September 2005, cutting likely production in the last months of 2005, Oil World said.

In October/December 2005 we expect a moderate year-on-year decline in total Malaysian crude palm oil output by one percent to 3.88 million tonnes," it said.

Malaysian palm oil futures fell on Wednesday as dealers liquidated positions ahead of Nov. 1-10 export data, which may show a decline in shipments.

The benchmark third-month January crude palm oil contract <KPOF6> on Bursa Malaysia Derivatives fell six ringgit a tonne to settle at 1,427 ringgit ($377.5) a tonne.

Overall volume was moderate at 3,585 lots of 25 tonnes each.

Weakness in rival soyoil also put pressure on palm oil futures.

December soyoil fell 0.08 cent per lb to 22.73 cents in electronic trade <BOZ5>.

Dealers expected the market to trade in a range of 1,420 to 1,450 ringgit ahead of Nov. 1-10 palm oil export data due on Thursday.

Cargo surveyor SGS put exports at 473,891 tonnes for Oct. 1-10, up 20.7 percent from the same period in September.

"Refineries say exports may be unchanged or around two percent lower. But there are also reports saying that exports will rise by 10 percent," said one dealer in Kuala Lumpur.

We saw some liquidation because of the uncertainty. But I think people are expecting exports to be a little bit lower," he said.

Dealers said there had been delays in shipments to consuming countries during a long holiday break in Malaysia.

The market was closed on Tuesday, Thursday and Friday last week for the Hindu Diwali and Muslim Eid al-Fitr Festivals.

Chicago Board of Trade soybean futures rose on Wednesday on a technical bounce before the government releases its monthly crop report on Thursday, traders said.

The January contract <SF6> closed 3 cents up at $5.88-1/2 per bushel and November <SX5> was 4 cents firmer at $5.78-1/4.

Trade see-sawed as the January initially fell 5 cents, finding support at $5.80-1/2 per bushel. Light speculative buying surfaced at that level until the lead month surpassed its 50-day moving average of $5.89-1/2, climbing to $5.92.

Funds bought about 2,500 contracts; Tenco and Fimat Futures each bought 1,000-1,500 January. Commercials were net buyers.

"It seemed it was just evening up ahead of the report. Everyone is wondering if we'll see 11 (billion bushels) in corn and 3 (billion) in beans," said one CBOT floor broker.

Both estimates would be higher than USDA's October projections.

An average of analysts' estimates pegged this year's U.S. soybean crop at 3.024 billion bushels, above the USDA's forecast in October for 2.967 billion. If realized, that would be the second largest soy harvest in U.S. history.

An analyst average for U.S. 2005/05 soy ending stocks was 317 million bushels, up from the USDA's October forecast for 260 million.

Firm cash markets were supportive. Cash prices on the southern portion of the Illinois River reached a point where they were stronger than the futures delivery equivalent, CBOT traders said.

In fact, November deliveries lightened to 37 contracts on Wednesday morning. An R.J. O'Brien customer was the key stopper of 36 lots. CBOT soy registrations were unchanged at 1,790 lots late Tuesday.

Early pressure stemmed from concerns about a lagging export pace. U.S. soy exports are behind a year ago; and with the spread of bird flu in Asia and Europe, concerns are mounting that global soy demand could be off as farmers cull flocks. But there's also hope U.S. meat exports could increase, thus increasing domestic soy use for pork and poultry feed.

There was floor talk that China bought two cargoes of U.S. soybeans overnight.

The market was turning its attention to South American weather, now that the U.S. soybean harvest was virtually complete.

Southern Brazil was forecast to be mostly dry this week, which will benefit field work and planting as that area has been too wet, according to private U.S. forecaster Meteorlogix. However, northern Brazil and Argentina were on the dry side and in need of rain, it added.

The soy products followed the fall and rise in soybeans. CBOT soymeal closed 40 cents higher to $1 lower, with December <SMZ5> up 40 at $174.30. Soyoil was 0.15 to 0.20 higher, with December <BOZ5> up 0.15 at 22.96 cents per lb.

Soyoil was supported by strong commercial buying, a trend for the past week or so.

"But curiously, ADM, Dreyfus and Cargill all sold a couple hundred contracts late," said one CBOT soyoil pit broker referring to late commercial sales.

The rebound in soymeal was contained amid worries about global feed demand due to the spread of bird flu.

Commercials were net buyers of soyoil. Funds sold about 500 to 1,000 soyoil and soymeal contracts.

Malaysian palm oil futures closed weak overnight as dealers squared positions before Nov. 1-10 export data, which may show a decline in shipments, traders said.

Volume was moderate across the complex. In soybeans, an estimated 58,654 futures and 23,478 options traded. Soymeal trade was pegged at 27,084 futures and 2,259 options. Estimated soyoil volume was seen at 26,556 futures and 2,845 options.

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