January 13, 2009

 

CBOT Soy Review on Monday: Bearish USDA data spark limit-down plunge

 

 

Soybean futures on the Chicago Board of Trade plunged its exchange-imposed daily trading limits Monday, backpedalling on higher-than-expected production, carryover and quarterly stocks from the U.S. Department of Agriculture.

 

CBOT March soybeans finished 70 cents lower at US$9.66, its daily allowable trading limit. The value of soybeans fell between 6.5% and 8% from Friday's close. The catalyst for the plunge was USDA data showing higher-than-expected supply and lower usage in contrast to expectations of lower production and ending stock forecasts, said Mario Balletto, analyst with Citigroup in Chicago.

 

There was a lot of liquidation of long positions established last week in anticipation of bullish estimates from the USDA, Balletto added.

 

In pit trades, speculative fund selling was estimated at 5,000 lots. At Monday's close, 1,055 contracts were offered in the March soybean contract at the limit down level on the electronic platform. The March soybean future was synthetically trading at US$9.62 in the options market on the close.

 

March soy meal settled US$20.00 lower at US$294.50 per short tonne. March soyoil finished 231 points lower at 34.41 cents per pound.

 

Spillover weakness from limit-down corn futures, sharp declines in crude oil and strength in the U.S. dollar added pressure to keep futures pinned in negative territory. Technical selling aided the declines, with pre-placed sell orders triggered as active contracts stumbled below support at their 100-day and 10-day moving averages.

 

The market made a correction from a nearly US$2.50 rally since Dec. 5. However, bullish underlying fundamentals remain underpinning features, with analysts viewing South American weather over the next 30 to 45 days as the true determinant of near-term price direction.

 

Dryness is still an issue in Argentina and China remains an active buyer of U.S. soybeans opening the door for prices to bounce back after the dust settles from Monday's USDA report later in the week, Balletto added.

 

The DTN Meteorlogix weather forecast for central Argentina points to a continuing round of very warm to hot and dry conditions during the next week. The only rainfall chance is in the form of a few light showers in the northern Argentina crop areas Monday and Tuesday, and again Thursday. No precipitation is headed for the southern areas during the next seven days. Northern temperatures are expected to range from 88 to 100 degrees Fahrenheit; southern temperatures will be 88 to 102 degrees Fahrenheit.

 

Meanwhile, USDA estimated 2008-09 U.S. soybean ending stocks at 225 million bushels, up from its previous forecast of 205 million, and well above the average of a Dow Jones Newswires survey of 186 million bushels.

 

USDA estimated 2008 soybean production 2.959 billion bushels in its annual production report, up from 2.921 billion estimated in November and above the average of survey estimates at 2.910 billion. U.S. soybean stocks as of Dec. 1 were reported at 2.276 billion bushels, above the average of survey estimates at 2.181 billion.

 

USDA also announced Monday private export sales of 399,000 metric tonnes of U.S. soybeans for delivery to China in the 2008-09 marketing year.

 

 

SOY PRODUCTS

 

Soy product futures tumbled, succumbing to the same speculative selling pressure seen in soybeans. Soymeal futures declined to their US$20.00 lower daily trading limits, pressured by confirmation of reduced demand in USDA's report and technical selling pressure.

 

Soyoil futures tumbled with the rest of the complex, but managed to hold above its lower daily trading limits on oil/meal spreading. Technical selling and spillover from crude oil attracted speculative selling, traders said.

 

March oil share ended at 37.02% and the March crush ended at 60 1/2 cents.

 

In pit trades, speculative fund selling was estimated at 1,000 lots in both soyoil and soymeal.