January 8, 2010

 

CBOT Soy Review on Thursday: Tumble on demand concerns, South America crop

 

 

Chicago Board of Trade soy futures tumbled Thursday, succumbing to speculative selling associated with bearish South American production prospects, a firmer U.S. dollar and fears of slowing Chinese demand.

 

CBOT January soy ended 32 3/4 cents lower at US$10.17 3/4, and March soy settled 33 cents lower at US$10.26.

 

Speculative funds were estimated sellers of 6,000 lots in soy, 1,000 lots in soymeal, and 2,000 lots in soyoil.

 

The market limped out of the starting blocks, extending the bearish overnight theme on carryover weakness from rising Brazilian production forecasts and fears that higher lending rates in China could slow Chinese soy demand, said Mike Zuzolo, president Global Commodity Analytics and Consulting. China's central bank raised a key interbank market interest rate Thursday for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the New Year.

 

The news raised fears of slowing U.S. soy export demand, as China's appetite for soy has been, and continues to be, the underpinning feature for U.S. soy exports. Since Sept. 1, total U.S. soy export commitments total 32.265 million metric tonnes, with China accounting for 19.757 million of the sales.

 

Concerns new Chinese import permits could damp China's soy interest carried over from Wednesday's session to take the edge off prices as well.

 

Technically inspired selling helped accelerate losses, as pre-placed sell stop orders were triggered once active contracts slipped below chart support in route to over one-week lows.

 

Despite bearish price movement, traders remain cautious of aggressively selling into the market, as the uncertainty of next week's crop report and anticipated index fund rebalancing of positions provided some underlying support.

 

Nevertheless, the combination of record U.S. production followed by potentially record crops in South America and the threat of Chinese demand slowing or shifting from U.S. origins to the southern hemisphere have bearish implications for CBOT soy prices.

 

 

Soy Products

 

Soy product futures ended sharply lower, tumbling in unison with the price slide in soy. The threat of reduced Chinese demand for soy and increased output forecasts for South American soy sent negative waves filtering through the products.

 

Soyoil futures received additional pressure from weakness in crude oil and world vegoil markets, traders said. However, soyoil did manage to gain some product value share versus soymeal on spreads, garnering mild support from downward revision in November soyoil stocks reported by Census Bureau.

 

U.S. Census Bureau on Thursday revised its November soyoil stocks estimate to 2.904 billion pounds, down from its preliminary estimate of 3.156 billion pounds, according to the Census Bureau's fats and oils stocks report.

 

January soymeal ended US$10.90 lower at US$307.00 per short tonne, while March soymeal settled at US$12.00 lower at US$298.20. January soyoil fell 68 points, or 1.7%, at 39.99 cents per pound, while March soyoil dropped 71 points, or 1.7%, to 40.36.

 

March oil share was 40.29% while the March soy crush ended at 74 cents.