January 15, 2010

 

CBOT Soy Review on Thursday: Futures stumble, lack follow-through buying

 

 

Chicago Board of Trade soy futures settled lower Thursday, retracing Wednesday's advances after a lack of follow-through buying.

 

CBOT January soy ended 15 cents lower at $9.68 1/2, and March soy settled down 8 1/2 cents at $9.84.

 

Speculative funds were estimated sellers of 5,000 lots in soy, 1,000 lots in soymeal and 2,000 lots in soyoil.

 

The market's inability to follow through on Wednesday's gains disappointed bulls, particularly in the face of supportive weekly export sales and monthly crushing data, said Mario Balletto, an analyst with Citigroup in Chicago.

 

The fear of waning Chinese demand in the face of ample world soy supplies as South America prepares to harvest record crops, on top of record production from the U.S., cast a negative cloud over the market, Balletto said.

 

The market consolidated within Tuesday's wide trading range, holding below key moving average support on technical charts. The absence of speculative fund buying that buoyed futures Wednesday opened the door for the setback, but late fund buying managed to trim declines heading down the stretch.

 

U.S. Department of Agriculture reported total weekly soy export sales were a net 754,100 metric tonnes for the week ended Jan. 7, with China being the primary buyer of 528,100 tonnes. Analysts had forecast sales between 600,000 and 800,000 metric tonnes.

 

The National Oilseed Processors Association said 164.4 million bushels of soy were crushed in December, up from 160.3 million in November and above the average analyst estimate of 161.1 million. The crush represented the strongest processing total for the month on record. Ample cash inventories, increased producer cash sales and favorable cash processing margins appear to account for this month's outsize activity, JP Morgan said in a market note.

 

 

Soy Products

 

Soy product futures stumbled in unison with soy futures. Soyoil futures led the downside among the products, succumbing to speculative selling. The market slid to a new two-month low, as ample U.S. stocks, poor domestic biodiesel demand and weakness in world vegoil markets overshadowed strong weekly export sales, analysts said. NOPA December soyoil stocks were pegged at 2.594 billion pounds, up from 2.411 billion in November and above the average analyst estimate of 2.508 billion. Soy oil inventories rose by a larger amount than did production, implying continued month-over-month demand loss, according to JP Morgan.

 

Soymeal futures ended lower, but gained product share on spreads. Spreading was the featured attraction in the market, with inverse spread relationships advancing on strong underlying export demand, said Citigroup's Mario Balletto.

 

USDA soymeal weekly export sales were a net 357,000 tonnes. Trade estimates ranged from 75,000 to 200,000 tonnes.

 

January soymeal ended $1.50 lower at $299.00 a short tonne, while March soymeal settled $1.10 lower at $290.40. January soyoil dropped 83 points, or 2.1%, at 37.80 cents a pound, while March soyoil fell 48 points, or 1.2%, to 38.53.

 

March oil share was 39.85%, while March soy crush ended at 78 1/2 cents.