In The News - 25/11/2005

Malaysian palm oil rose on Friday after players moved to cover shorts with Chicago markets closed due to a holiday in the United States.

The third-month crude palm oil contract on Bursa Malaysia Derivatives, February <KPOG6>, closed up 7 ringgit at 1,419 ringgit ($375.45) a tonne.

Overall volume stood at 3,905 lots of 25 tonnes each, double Thursday morning's tally of 1,947 lots. The market can easily surpass 6,000 lots on a busy day.

Trade was slow in the morning after cargo surveyor Intertek Testing Services estimated a near-20-percent drop in exports of palm oil for Nov. 1-25 compared with Oct. 1-25.

Societe Generale de Surveillance, another cargo tracker watched more closely by the industry, said in the afternoon it had estimated a 21 percent drop for Nov. 1-25 exports.

November shipments of palm oil are thin due to long holidays.

Dealers said the closure of the Chicago Board of Trade on Thursday for the U.S. Thanksgiving holiday had also deprived the palm oil market in Kuala Lumpur of important leads from soyoil.

"With the CBOT closed until Monday for Thanksgiving, no one here wanted to take a chance in liquidating," said a palm oil trader. "So they covered shorts instead."

Chicago Board of Trade soybean  futures slid to a one-month low on Friday amid technical selling spurred by fears that bird flu will cause global feed demand to shrink and rains will give South America's soy crop a lift, traders said.

"It's going to be hard to rally back with bird flu and good rains in South America," said one CBOT floor broker.

But underpinning futures were strong cash markets. Even though U.S. supplies are plentiful due to a near-record harvest and lagging exports, soybeans are firmly held by farmers. That was making it difficult for processors to replace their crush.

"The cash is very much different than the futures. The basis is really on fire," said analyst Don Roose with U.S. Commodities in West Des Moines, Iowa.

"As we push down, the farmer is not selling -- so the basis levels continue to move back and now we're getting back to some historical numbers," he said.

January soybeans <SF6> closed 9-1/2 cents lower at $5.69-3/4 per bushel. The deferreds were 9-3/4 to 2-1/2 cents weaker.

The market was technically weak, trading below key moving averages. Sell-stops were triggered on the open and prices remained weak throughout the session.

Commodity funds sold 3,000-3,500 soybean contracts, while commercial pricing underpinned the market, traders said.

Vietnam said on Friday that bird flu had spread to three more northern provinces and China reported a fresh outbreak, following its confirmation this week of its first human death from the disease.

But U.S. analysts said domestic use of soybeans and soymeal may increase if U.S. meat exports expand to meet world demand for food.

Sixty percent of Brazil's soybean growing region saw good precipitation in the past day as rain fell over 50 percent of Argentina's crop areas, traders said.

More showers were forecast to move through South America this weekend, which should promote crop development in Brazil and Argentina, the world's No. 2 and No. 3 soybean producing countries following the United States.

The soy products followed soybeans lower. December soymeal <SMZ5> was down $2.60 at $172.20 per ton, with the deferreds $1.80 to $3.40 lower. December soyoil <BOZ5> closed 0.15 cent per lb weaker at 22.01 cents, with deferreds 0.03 to 0.17 down.

Technical sales by commodity funds leaned on the soy-product markets. But commercials took advantage of the dip to price both soyoil and soymeal, which kept prices from falling more.

Another round of CBOT soymeal cancellations offered some underpinning to the December contract.

December is approaching the futures delivery period, and one indicator of soymeal demand is the cancellation of registrations. CBOT soymeal registrations declined to 238 lots from the previous 327 lots late Thursday. On Wednesday, 149 contracts were canceled.

Early weakness in crude oil added pressure to soyoil. Soyoil moved off its lows late as crude oil recovered by the close. The soyoil market has been tracking the energy markets this fall amid prospects for increased demand for soy-based biodiesel.

Malaysian palm oil futures closed mostly firm overnight.

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