Tuesday, July 17, 2012

RTRS- High soyoil prices to spur demand for palm oil

AMSTERDAM, July 16 (Reuters) - A sharp increase in soyoil prices will spur demand for cheaper palm oil in Europe, lifting prices, but any deepening of the euro zone debt crisis could cap gains, traders said.


Soyoil prices on the European vegetable oil market rose 15 percent over the past month to 1,055 euros a tonne on Monday from 916 euros a tonne on June 16.

In the same period crude palm oil prices rose 7 percent to $1,037 a tonne from $967.

"The spread with soybean oil is getting bigger and that could be the demand driver (for palm oil), but the economic downturn in Europe could pressure down prices," one trader said.

"If the crisis deepens, people could panic and pull out of the market, going to safe havens such as gold."

"It is a very difficult market these days," another trader said.

The Dutch Board for Margarine Fats and Oils said in February it saw p alm oil d emand i n the European Union f lat this year as the main consumers - the food-processing industry and biodiesel producers - faced difficulties including higher raw material costs and a fall in demand due to economic crisis.(nL5E8D75VT)

Soybean futures on the Chicago Board of Trade reached new highs on Monday as the worst drought since 1988 hit key growing areas in the United States, the world's top exporter. GRA/

Unfavourable weather in the Black Sea region, one of the world's top exporters, supported prices of all grains and oilseeds as well.

Higher prices of oilseeds, including soybean and rapeseed, lifted prices of palm oil, but at a slower pace as production is forecast to rise this year.

"We expect this will encourage increased end-user demand (for palm oil) as the prospect for oilseed production in the U.S. and India has declined due to adverse weather," Rabobank said in a research note.

"We maintain our view that vegetable oil prices will maintain their historically low valuation relative to meal in the short term, but will remain bullish across the entire oilseed complex on the deteriorating supply outlook."

Trader's Highlight

DJI- NEW YORK, July 16 (Reuters) - A surprise decline in June retail sales was the latest worrying sign from the economy, pushing stocks slightly lower on Monday, but Citigroup's earnings limited losses.

The S&P 500 has fallen in seven of the past eight sessions, pressured by concerns about economic growth. Still, in a sign of resilience, the index is up roughly 7 percent from a low hit early in June despite the worsening economic data.

Trading volume at 5.06 billion shares on the NYSE, Amex and Nasdaq was the second lightest day this year, according to preliminary data from Reuters.

The drop in retail sales in June, the third consecutive monthly decline, contrasted with economists' expectations for a small increase and was the latest sign the recovery is flagging. (nL2E8IDGH1)

Citigroup's earnings, which exceeded estimates, followed JPMorgan Chase's JPM.N forecast-beating earnings on Friday, which sparked a rally and broke a six-day streak of losses by the Dow industrials.

Shares of Citigroup C.N gained around 0.6 percent to $26.81. Although the third largest U.S. bank by assets reported stronger-than-expected earnings, its profit fell 12 percent due to losses from credit crisis-era assets.

Giri Cherukuri, head trader at OakBrook Investments, which oversees $1.3 billion in Lisle, Illinois, said there was a tug-of-war between better-than-expected earnings in the financial sector and worries about the economy.

"The next week or so the market will be driven more by earnings than economic numbers," he said, noting that recent cautious outlooks from U.S. corporations could translate into disappointing earnings as reporting season unfolds.

Many companies have warned on profits in recent weeks. Negative to positive earnings guidance for the second quarter is 3.3 to 1, the worst since 2008, Thomson Reuters data showed.

The Dow Jones industrial average .DJI dropped 49.88 points, or 0.39 percent, to 12,727.21. The Standard & Poor's 500 Index .SPX fell 3.14 points, or 0.23 percent, to 1,353.64. The Nasdaq Composite Index .IXIC lost 11.53 points, or 0.40 percent, to 2,896.94.

"Three months in a row of lower retail sales is pretty concerning. People are going to have to lower their GDP estimates," said Paul Zemsky, head of asset allocation at ING Investment Management in New York. "Given that, I'm surprised the market is holding so well."

Zemsky said expectations that earnings turn out better than feared could be one reason. Record low U.S. Treasury bond yields and expectations that the Federal Reserve could support the economy have also helped prop up stocks.

The IMF shaved its 2013 forecast for global growth to 3.9 percent from the 4.1 percent it projected in April, trimming projections for most advanced and emerging economies. It left its 2012 forecast unchanged at 3.5 percent.

The World Trade Organization ruled in favor of the United States, finding that China discriminates against foreign bank cards. The decision could help U.S. credit card companies like Visa, Mastercard and American Express AXP.N.

In another credit card development, Visa Inc V.N and MasterCard Inc MA.N and banks reached a $7.25 billion settlement with U.S. retailers in a lawsuit late on Friday. (nL2E8IDJVK)

Visa rose 2.5 percent to $127.15 and MasterCard shares gained 1.7 percent to $436.89. American Express shares rose 1.2 percent to $58.64.

In mergers and acquisitions news, GlaxoSmithKline GSK.L is to acquire its long-time partner Human Genome Sciences Inc HGSI.O for $3 billion, ending a three-month hostile pursuit of the U.S. biotech company on friendly terms after sweetening its offer. (nL6E8IGCB9) Shares of Human Genome HGSI.O rose 4.5 percent to $14.19.

In another healthcare deal, private equity firm TPG said it would buy U.S.-based Par Pharmaceutical PRX.N for $1.9 billion, sending Par shares up 36.7 percent to $50. (nL2E8IG1AN)

NYMEX- NEW YORK, July 16 (Reuters) - U.S. crude futures rose for a fourth straight session on Monday, lifted by hopes for economic stimulus, especially in China, a weak dollar and news a U.S. Navy vessel offshore the United Arab Emirates fired on a small boat that failed to heed warnings.
 
CBOT SOYBEAN- Chicago Board of Trade soybean futures were higher as heat and dryness kept eating away at U.S. 2012 crop prospects.

* Small amounts of rain this week and early next week in about 70 to 75 percent of the U.S. Midwest crop belt will provide minor relief to withering corn and soybeans, meteorologists said on Monday.

• "There's no huge change in the forecast today, maybe a little more favorable for crops but we couldn't have gotten much worse," John Dee, a meteorologist for Global Weather Monitoring, said.

• A Reuters poll of 12 analysts showed an estimate for U.S. soybean conditions in Monday's USDA weekly crop progress report at 35 percent good-to-excellent, down from 40 percent a week ago.

• Trade sources said Informa Economics cut its estimate for 2012 U.S. soybean yield to 40.0 bushels per acre from the previous 42.0 and dropped production to 3.012 billion bushels from the previous 3.161 billion.

• USDA said U.S. soybeans inspected for export last week totaled 14.271 million bushels, down from 19.175 million a week ago.

• August was above all key moving averages. The nine-day RSI was at 78.

FCPO- SINGAPORE, July 16 (Reuters) - Malaysian crude palm oil futures ended Monday higher, as demand prospects brightened after forecasts of more harsh weather in the United States threatened to tighten global oilseed supply further.

Unfavourable weather that could hurt the soybean crop may lead to a smaller supply of soybean oil, shifting demand to the cheaper refined palm oil.

"One reason for the market rally today is the U.S. weather. Another reason is the big spread between soybean oil and palm oil that is more than $200 per tonne," said a trader with a foreign commodities brokerage in Malaysia.

Benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange gained 1.7 percent to close at 3,122 ringgit ($981) per tonne, after going as high as 3,161 ringgit.

Traded volumes stood at 29,738 lots of 25 tonnes each, higher than the usual 25,000 lots.

Technicals are also bullish. Reuters market analyst Wang Tao said palm oil might break above a resistance at 3,168 ringgit, and rise further to 3,208 ringgit. (nL4E8IG0XK)

Traders appeared unfazed by a 21 percent drop in Malaysian exports for the first 15 days of the month as weather fears remained in focus. PALM/ITS

"I don't think exports will affect the market temporarily, plus the month is not over yet so the market is still waiting for demand to pick up," the Malaysian trader said.

Demand is expected to be supported ahead of a slew of Asian festivals starting with Ramadan this week and with China and India celebrating key holidays from September to November.

Another cargo surveyor, Societe Generale de Surveillance, will issue export data later on Monday. PALM/SGS

Drought stress has already dragged soy crop condition ratings to the lowest point for this time of year since 1988, and traders are expecting further downgrades in the U.S. Department of Agriculture's weekly report on Monday. GRA/

Traders said weather-driven rallies in other vegetable oil markets also supported palm oil prices. By 1003 GMT, the most active U.S. soyoil for December BOZ2 delivery gained 1.2 percent. Th e most active January 2013 soyoil contract DBYF3 on the Dalian Commodity Exchange closed up 2.8 percent.

"Supportive factors such as the U.S. dry weather pushed prices to new highs. It's hard to say now if prices will continue to go higher, but declines last week have provided good upside for Dalian soybean oil," said Huang Zhi Qiang, an analyst with Guotai Junan Futures in Shanghai.

Crude oil prices held steady above $102 a barrel on Monday, supported by weekend comments from China's Premier Wen Jiabao that the government would step up efforts to boost the economy of the world's second-largest oil consumer. O/R

REGIONAL EQUITY-BANGKOK, July 16 (Reuters) - Southeast Asian stock markets extended gains on Monday with Malaysian shares hitting a record high as fears of an economic hard-landing in China subsided, but trading volumes were low as investors waited for a U.S. Federal Reserve meeting.

Malaysia .KLSE hit an all-time high of 1,635.96 points with a 0.6 percent gain, while the Philippines .PSI outperformed the region with a 1.6 percent jump.

Indonesia .JKSE gained 0.7 percent to a more-than one-week high with, Thailand .SETI edged up 0.3 percent to its highest since May 8.

Singapore .FTSTI closed 0.1 percent firmer at 2-1/2-month high.

Regional analysts said investors cautiously bought into equities ahead of Federal Reserve Chairman Ben Bernanke's semi-annual testimony to the U.S. Congress on the economy set for Tuesday and Wednesday.