January 11, 2006

 

CBOT Soy Review on Tuesday: Spec selling extends market's descent

 

 

Soybean futures on the Chicago Board of Trade stumbled lower Tuesday, extending its descent from prior gains on speculative selling.

 

March soybeans finished 5 cents lower at US$5.89, March soymeal settled US$2.20 lower at US$182.40 a short tonne, while March soyoil ended 16 points lower at 22.43 cent a pound.

 

The lower price action can be chalked up to the diminishment of index fund buying, favorable South American weather outlooks and the prospects for U.S. soybean ending stocks to inch up toward 500 million bushels, said Dan Basse, president AgResource in Chicago.

 

The market is moving back toward trading fundamentals, after rallying on technically based and index fund related buying. A change in weather outlooks for Argentina has taken the South American crop threat from the market and with no shortage of available supplies, which many analysts expect to be reflected in Thursday's crops reports kept buyers on the run.

 

U.S. Department of Agriculture is scheduled to release its annual crop production, supply and demand and quarterly grain stocks reports Thursday 7:30 a.m. CST (1330 GMT).

 

Tuesday's price slide took prices to 1-month lows, with the four day drop in prices totaling 43 1/4 cents basis the March contract. Without a crop threat in South America, fundamentals looking more bearish, and index fund related buying winding down, bullish traders had little incentive to aggressive buy into the market, analysts added.

 

However, scale down index fund buying did emerge down the stretch to keep futures trading above their lows, said a CBOT commission house broker.

 

Meanwhile, the DTN Meteorlogix forecast said during the next five days, the forecast for Argentina calls for a much-improved weather outlook for both corn and soybeans, due to widespread rainfall of more than 2 inches total by the end of this coming weekend. The majority of the rain is expected to develop Friday through Sunday, and the rain will be accompanied by a sharp cooling trend; thus, crop weather prospects are on track to be much better by next week, Meteorlogix said.

 

In pit trades, ADM Investor Services, Cargill, ABN Amro, RJ O'Brien and Rand Financial were key buyers. On the sell side, Citigroup sold 800 March, Fimat sold 500 March, Man Financial sold 600 March, Refco sold 1,800 March, with Shatkin/Arbor and UBS Securities key sellers as well. Fund selling was estimated near 6,000 lots.

 

South American soybean futures finished lower across the board. The March futures ended 5 cents lower at US$6.15.

 

 

SOY PRODUCTS

 

Soy product futures followed a similar path to soybeans, pressured by speculative selling. The absence of supportive inputs kept a defensive theme in the market. Technically related selling added pressure to both soymeal and soyoil futures, with the March meal contract managing to fill a chart gap down to US$182.00 from Dec. 12. The soyoil March future filtered into a chart gap as well, but managed to find late support from light index fund buying heading toward the close. March oil share ended at 38.08%, and the March crush was at 59 cents.

 

In soymeal trades, Cargill and Bunge Chicago were featured buyers ABN Amro, JP Morgan, Citigroup, Man Financial and Refco were key sellers on the day. Commodity fund selling was estimated at 3,000 lots.

 

In soyoil trades, ADM Investor Services, Fimat, and RJ O'Brien were buyers, with Calyon Financial, Citigroup, and Rand Financial featured sellers. Fund selling was estimated at 2,000 lots.