In The News - 11/11/2005

Malaysia's crude palm oil futures ended mixed in slow trade on Friday as players waited for fresh leads, dealers said.

The benchmark third-month January crude palm oil contract <KPOF6> on Bursa Malaysia Derivatives settled up 1 ringgit at

1,436 ringgit ($380.9) a tonne after touching an intra day low of 1,432 ringgit.

"The market moved in a very tight range today because people are not sure where palm oil's going," said one dealer in Kuala Lumpur.

Other traded months settled either up 1 to 3 ringgit or dropped 1 ringgit <0#KPO:>.

Overall volume was light at 1,604 lots of 25 tonnes each compared to Thursday's 5,885 lots and the 6,000 lots or more traded on a busy day.

Dealers said they expected the market to move in a tight range in the next week, with the immediate resistance remaining at 1,450 ringgit and support at 1,420 ringgit.

"The trading range will be the same because there is no new lead to the market now," said another dealer.

Soybean futures at the Chicago Board of Trade rallied on Friday, supported by strength in the soymeal pit and firm domestic cash markets amid good Chinese demand for U.S. soybeans, traders said.

November soybeans <SX5> closed 16 cents per bushel higher at $5.93 and January <SF6> broke $6 for the first time in a week, settling 14 cents up at $6.01-1/2.

December soymeal <SMZ5> was $6.20 per ton higher at $181.70 -- reaching a three-month high. The deferreds were up $5.30 to $6.20.

"It's really a meal-led rally. A lot of the users were pretty bearish partly because oil had been doing so well and thinking the large supply of beans would keep meal on the defensive," said Dale Gustafson, analyst with Citigroup.

But USDA's crop report on Thursday projected a strong U.S. soy crush pace, raising it 25 million bushels while leaving soymeal stocks unchanged. But U.S. soyoil stocks were hiked 250 million lbs. That led to some meal/oil spreading on Friday, as traders continued to unwind their long oil/short meal spreads, analysts said.

The rally was a delayed reaction to the adjustments in the government's crush estimate as traders reacted to the increase in U.S. soybean stocks on Thursday.

The higher U.S. crush pace reflected expectations for strong feed demand, analysts said.

"There's no reason to think that the feed demand is not good. Your feed costs are cheap, meat prices are pretty good, feeding margins ought to be pretty strong," said Gustafson.

Some traders also predicted that U.S. meat demand would increase further as the world culls its bird flock due to the spread of bird flu and the United States would export more pork and poultry.

Also supportive were strong U.S. cash markets.

"The biggest thing is the strong cash markets. Farmers aren't selling and China bought a lot of beans -- probably more than people think in the last seven to 10 days," said one CBOT cash-connected floor broker.

There was talk that China bought eight to 10 cargoes of U.S. soybeans this week. Nearby CIF values for soy at the U.S. Gulf were up 2-3 cents by the midsession.

The strength in the cash market was reflected by the firmness in the nearby spread, tightening 2 cents.

The rally sparked few farmer sales but some country elevators moved hedged supplies to processors due to the improvement in nearby basis levels, Midwest cash dealers said.

Strong commercial stopping of November futures deliveries on Friday was another indication of strong cash markets, traders said.

There were light November deliveries of 59 contracts on Friday, with a Banc of America customer issuing 50 lots. Strong commercial stopping was noted, with the Term Commodities house account taking 38 lots and an R.J. O'Brien customer stopping 21 lots. CBOT soy registrations were unchanged at 1,790 lots.

Soyoil was the weakest of the complex, pressured by lingering concerns about big U.S. soyoil stocks. December <BOZ5> was down 0.03 at 22.74 cents, with deferreds 0.12 lower to 0.02 higher.

Also bearish were outlooks that the National Oilseed Processors Association will report near record soyoil yields in Monday's report.

"USDA left its soyoil yield at 11.3 (lbs/bu) and a lot of traders are thinking that NOPA's number could be closer to 11.5," said Vic Lespinasse, floor broker with A.G. Edwards.

That would mean even bigger oil stocks than USDA's current forecast, he said.

Analysts said they expected NOPA to report an October soybean crush of 148 to 152.5 million bushels, compared to September's crush of 127.1 million.

Volume was moderate. In soybeans, an estimated 66,959 futures and 14,666 options traded. Soymeal trade was pegged at 32,784 futures and 4,044 options. Estimated soyoil volume was 27,925 futures and 2,082 options.

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