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Beans – 21/2 to 4 cents higher. – $5.543/4 – (Aug) – (+31/2)

Meal – $0.70 to $1.80 higher. – $184.80 – (Aug) – (+1.40)

Oil – 10 to 30 points higher. – 18.83 – (Aug) – (+13)

Palm – 12 to 16 ringgits higher. – 1,375 – (Sep) – (+16)

Summary

Soybean futures: Higher following supportive USDA old and new crop soybean ending stocks.

Soymeal futures: Higher following beans, spreading activity and ongoing economic problems in South America.

Soyoil futures: Higher following beans and gains in Canadian canola and Malaysian palm oil markets.

Palm oil futures: Higher following the June MPOB crop report and last night’s soyoil gains.

Soybean futures

closed higher last night, after a choppy two sided trading session, following beans and gains in both the Malaysian palm and Canadian canola markets. Canadian markets have rallied recently, following hot and dry weather and recent export demand. This is despite lower than expected weekly export sales and a bearish supply and demand report from the USDA, which showed an increased in both old and new crop stocks. Although, this helped to pressure the market earlier in the session.

The August contract month traded between a session low of 18.51 to a high of 18.88, to close at 18.83 cents per pound. The September month traded between a low of 18.65 to a high of 18.99, before closing at 18.97. The funds were moderate buyers last night, adding to their already large net long. The latest commitment of trader’s report will be released after the close tonight.

The weekly USDA export report, for the week ending 4 July, showed soyoil sales at 1,500 tonnes, at the low end of estimates for nil to 6,000 tonnes. The report showed sales of 9,500 tonnes to the Korean Republic, 9,100 to the Dominican Republic and 4,000 to El Salvador. However, this was offset by cancellations of 12,300 tonnes, by an unknown destination and 9,500 by China. Total sales for the 2001-2002 marketing year, which ends in September, are now 758,600 tonnes, up from last year’s poor 312,100. This is 73% of the revised USDA export forecast of 1.04 million. Weekly shipments were high at 56,000 tonnes, including 23,800 to Egypt and 19,000 tonnes to China.

USDA summary:

US 2001-2002 soyoil production was increased this month, from 8.53 to 8.58 million tonnes, due to an increase soybean crush. Domestic usage was lowered by 50,000 tonnes to 7.62 million, but exports were increased from 1 to 1.04 million tonnes. As a result ending stocks were increased from 1.2 to 1.24 million tonnes. For the new marketing year, production was increased slightly to 8.72 million, again due to a slightly higher crush. Domestic usage was lowered by 90,000 tonnes to 7.85 million, with exports raised from 884,514 to 980,000 tonnes. Ending stocks were increased by 70,000 tonnes to 1.17 million. The USDA also estimated China’s soyoil imports for 2002-2003 to 500,000 tonnes, up from 250,000 this year.

Malaysian palm oil futures

closed higher at the midday close, after a range bound morning session, following the official June crop report from the Malaysian Palm Oil Board (MPOB) and last night’s higher soyoil close. The MPOB confirmed that Malaysian palm oil production rose only slightly from the previous month. Although traders say that the prospect of slowing exports and rising production in the coming months should limit any gains. The September contract month traded between a session low of 1,368 to a high of 1,379, to close the morning session at 1,375 ringgits a tonne.

Malaysia’s June palm oil production rose 2% to 943,471 tonnes, from 925,023 in May, according to the official crop report from the Malaysian Palm Oil Board (MPOB). This is more or less in line with yesterday’s private estimate, from an influential private forecaster, for 945,000 tonnes. Palm oil exports fell 7.2% in June to 876,036 tonnes, from 944,234 the previous month, according to the report. This is up from yesterday’s private estimate of 855,000 tonnes. End June stocks fell 2% last month to 910,116 tonnes, from 929,940 at the end of May, but up slightly from yesterdays estimate of 905,000 tonnes.

Soybean futures

closed higher last night, with the exception of July will closed lower ahead of its expiration today, following supportive USDA old and new crop ending stocks. On the bearish side, however, the USDA issued its first crop estimates for 2002-2003 showing that South American soybean production will exceed the US, for the first time. There is also some support still coming from concerns over long range US weather. Although current conditions are seen as more favourable, given cooler temperatures and the increased chance of rain, long range forecasts call for the return of hot and dry weather. Again weather conditions during end July-early August are critical for determining the size of next year’s US soybean crop.

The August contract month traded between a session low of $5.43 to a high of $5.571/2, to close at $5.543/4 a bushel. The November contract traded between a low of $5.081/2 to a high of $5.21, before closing at $5.19. The funds were only minor buyers last night, but are already holding onto a massive net long.

On another note, the average sea surface temperatures throughout the equatorial Pacific Ocean during the May-June 2002 period have reached the 0.5 degrees Celsius above normal threshold that the National Oceanic and Atmospheric Administration (NOAA) uses to define an El Nino event. This prompted NOAA to state “a Pacific basin warm episode (El Nino) has now developed” in its monthly El Nino update issued yesterday. Although the NOAA was quick to point out that current conditions represent a weak El Nino episode, nowhere near the intensity of the major 1997-98 event. NOAA also pointed out that the global impact of the current El Nino should also be much less significant than in 1997-98.

The weekly USDA export report, for the week ending 4 July, showed combined old crop-new crop soybean sales at 225,400 tonnes. This was within trade estimates for 100,000-250,000 tonnes, but traders say that this is not impressive and indicates that demand is now switching to South America. Sales included 120,200 tonnes to Indonesia and 39,100 to Mexico, there were no sales reported for China. However, the report also showed cancellations of 104,300 tonnes, including 62,200 by Japan and 25,000 by an unknown destination. Total sales for the 2001-2002 marketing year, which ends next month, is now 29,577,200 tonnes, up from 27,391,900 a year ago. This compares to the revised USDA estimate of 28.44 million.

USDA summary:

As expected, the USDA lowered its US 2001-02 and 2002-03 soybean ending tocks to 210 million (5.72 million tonnes) and 230 million bushels (6.27 million), respectively. Although this was within trade estimates and some traders believe that this is already factored into prices. This is as a result of an increase to both exports and crush by 10 million bushels each, but again this was within expectations, although further increases in exports can be expected to reflect currently weekly sales. For the 2002-2003 marketing year, the report lowered the production estimate following a decline of 500,000 acres in planted area, although yield was left intact at 39.7 bushels per acre. Now, output in 2002-03 is forecast at 2.860 billion bushels (77.84 million tonnes), down from the record 2.891 (78.67 million) in 2001-02. The smaller production estimate combined with a 5 million-bushel increase to the crush estimate, although offset by the 10 million-bushel reduction in exports, resulted in the fall in ending stocks.

Traders and analysts are now waiting for next month’s USDA supply and demand report to see if there will be any revision in soybean plated acres. The market was surprised that the latest planting intentions report, released at the end of June, showed an increase in corn acres and a lower bean planted acres. The market had expected to see a switch of 500,000 to 1,000,000 corn acres to soybeans, due to planting delays in the Eastern Corn Belt.

The USDA continued to suggest that Brazil’s 2001-02 soybean crop would be as large as 43.5 million tonnes, a number at which traders laughed. According to them, local analysts in Brazil and the government have long suggested the crop size would not exceed 42 million tonnes. It is still believed that the USDA will probably still have to lower this forecast in future reports. The USDA also left the Argentina’s 2001-02 crop unchanged at 29.5 million tonnes, despite expectations that that number should be increased to 30 million.

However, the USDA also released its first estimate for 2002-2003 South American soybean production. It now estimates Brazil’s 2002-03 crop at 47 million tonnes, exceeding some market guesses, and it estimated Argentina’s crop at 30 million, as expected. According to the USDA total South American soybean production for 2002-2003 will reach 80.7 million tonnes, this if true, would be the first time it has exceeded US production.

The overnight market is currently trading with beans up 1/4 to 1 3/4 cents, meal is up $1.20 to down $0.20 with oil up 8 to down 21 points.

Regards
Gary Lewis

Currency

GBP: USD – 1.5524
EUR: GBP – 0.6379

EUR: USD – 0.9899

Disclaimer: The information contained herein is taken from sources we believe reliable, but Cargill PLC does not guarantee that it is accurate or complete and should be used for information purposes only. All statements and opinions expressed are subject to change without notice.