January 13, 2010

 

CBOT Soy Review on Tuesday: Set 2-month lows on bearish output forecasts

 

 

Chicago Board of Trade soy futures tumbled Tuesday, dropping to two-month lows on bearish U.S. Department of Agriculture output forecasts.

 

CBOT January soy ended 32 1/4 cents lower at US$9.69 1/4, and March soy settled 32 1/2 cents lower at US$9.78.

 

Speculative funds were estimated sellers of 12,000 lots in soy, 3,000 lots in soymeal, and 4,000 lots in soyoil.

 

Record U.S. production, larger South American crop forecasts and the threat of reduced export demand from China were bearish features sending prices spiraling lower.

 

Spillover weakness from a plunge in corn futures to their lower daily trading limits added to the defensive theme, discouraging buyers from stepping in front of the lower trend, said Sid Love, analyst with Kroph and Love Consultants.

 

Technical pressure associated with futures dropping below major moving average support was another feature extending the downturn. Futures settled lower for the fifth consecutive trading day, with the March futures dropping 7.8% or 83 cents lower during the period.

 

Large pre-placed sell orders accelerated the declines once active contracts penetrated underlying technical support levels.

 

Indications of more tightening of the Chinese economy raised the question of slowing Chinese soy demand, said Bill Nelson, analyst with Doane Advisory Service. This provided a backdrop for price weakness, with limit-down corn prices a dominating factor, he added.

 

Looking ahead, CBOT futures are poised to remain in a near-term downtrend with market focus shifting to record South America output that will lure world buyers there, a common occurrence.

 

USDA projected 2009 U.S. soy production at 3.361 billion bushels. U.S. production is the largest on record. The average yield per acre is estimated at a record high 44.0 bushels. USDA projected 2009-10 soy ending stocks of 245 million bushels, down 10 million from the December estimate of 255 million.

 

Meanwhile, soy stocks in the first quarter of the 2009-10 marketing year were estimated at 2.337 billion bushels as of Dec. 1, the USDA reported, below the average analyst estimate of 2.411 billion bushels.

 

 

Soy Products

 

Soy product futures fell sharply in unison with soy futures. The combination bearish technical signals, the threat higher global soy supplies and fear of slowing demand from China served as the catalyst to pressure prices, analysts said. Soyoil futures garnered additional pressure from borrowed weakness from crude oil futures.

 

January soymeal ended US$9.30 lower at US$295.40 per short tonne, while March soymeal settled at US$10.30 lower at US$285.80. January soyoil fell 93 points, or 3% at 38.26 cents per pound, while March soyoil dropped 92 points or 2.7% to 38.63.

 

March oil share was 40.18% while the March soy crush ended at 75 3/4 cents.