January 18, 2006

 

CBOT Soy Review on Tuesday: Stumbles lower on bearish fundamentals

 

 

Chicago Board of Trade soybean futures stumbled lower in relatively quiet trade Tuesday, erasing Friday's gains as bearish underlying fundamentals weighed on prices.

 

March soybeans finished 5 1/4 cents lower at US$5.71 1/4, March soymeal settled US$1.40 lower at US$180.30 a short tonne, while March soyoil ended 45 points lower at 21.22 cent a pound.

 

The market effectively took some risk premium out, with beneficial rains in Argentina during the weekend, returning market focus to supply side bearish fundamentals, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

Technical weakness and a sluggish export pace added to the bearish psychology of futures, as the market continues to struggle to find strong export consumption at recent price levels. However, the inability of the most active March future to challenge support at last week's low - US$5.69 provided mild support to limit downside movement.

 

Futures continued to consolidate within Thursday's gap lower trading range, unable to get some type of chart formation to build momentum on, analysts said.

 

The DTN Meteorlogix forecast said the only major trouble spot for hot and dry weather in South America during the balance of this week is in south-central Brazil - northern Parana province through Mato Grosso do Sul. This sector of Brazil's soybean belt had hot and dry weather during the weekend. More of the same is in store during this week.

 

Elsewhere in Brazil and Argentina, crop weather is generally favorable. Rio Grande do Sul and southern Parana, in southern Brazil, have a good chance at rainfall totaling at least one inch during this week, with some locally heavier occurrences. Mato Grosso, has had generally favorable weather throughout the growing season, and will continue in that trend. In Argentina, beneficial rains occurred last week, which for all practical purposes broke the back of a developing drought in the central crop areas. Conditions will turn drier along with warmer temperatures this week, but the abundance of recent rainfall will minimize crop stress, Meteorlogix added.

 

U.S. Department of Agriculture said soybeans inspected for export in the week ended Jan. 12 totaled 18.712 million bushels, down 8% from last week. Analysts expected soybean inspections in a range of 17 million to 26 million bushels. Year-to-date soybean export inspections total 435.694 million bushels, 25.6% behind last years pace at the same time.

 

The USDA said Tuesday, private exporters reported the sale of 110,000 metric tonnes of U.S. soybeans for delivery to China in the 2005-06 marketing year.

 

In pit trades, Calyon Financial and Tenco each bought 500 March, and UBS Securities bought 1,000 March. Sellers were scattered among various firms, with commodity funds seen as even on the day.

 

South American soybean futures ended lower across the board. The March futures ended 5 cents lower at US$6.02.

 

 

SOY PRODUCTS

 

Soymeal futures succumbed to selling pressures associated with the declines in soybeans, as the market continued its consolidative phase following previous setbacks.

 

Soyoil futures emerged as the weakest link in the soycomplex, carving out a new low for the current move. Speculative selling was a featured attraction, as bearish supply side fundamentals amid last week's hefty increase in projected ending supplies and a well above average stocks figure in the December National Oilseed Processors Crush report cast a bearish cloud over the market, traders said. However, underlying commercial support managed to keep a floor under prices.

 

March oil share dropped to 37.05%, and the March crush was at 58 3/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various firms, with Bunge Chicago and Goldenberg Heymeyer principle sellers on the day.

 

In soyoil trades, Bunge Chicago bought 500 March, ADM Investor Services bought 300 may and 300 July, and Citigroup bought 500 March. Man Financial sold 500 March, JP Morgan, RJ O'Brien, Tenco and Rand Financial each sold 300 March and Refco sold 400 March. Commercial buying was pegged at 1,600 lots and commodity fund selling was estimated at 2,000 lots.