January 19, 2006

 

CBOT Soy Review on Wednesday: Extends descent on fundamental pressure

 

 

Soybean futures on the Chicago Board of Trade fell again Wednesday, extending their descent from post harvest highs, as bearish fundamental outlooks kept a defensive presence in the market.

 

March soybeans finished 5 1/2 cents lower at US$5.65 3/4, March soymeal settled US$2.80 lower at US$177.50 a short tonne, while March soyoil ended 6 points lower at 21.16 cent a pound.

 

Market fundamentals are pointing lower, and without a significant threat to South American crops amid recent rain events in Argentina, the weight of heavy U.S. inventories is magnified, said John Kleist of Kleist Ag Consulting.

 

The most-active March futures stumbled to a six-week low, before downside pressure stalled near the December lows, as the absence of index fund buying has left little incentive for buyers to stand in front of the speculative selling spree currently moving through the market, traders said.

 

Futures are having trouble holding technical support levels in the face of fundamental influences. Long liquidation and local selling are managing to pin prices in negative territory with traders viewing downside movement as the path of least resistance, analysts added.

 

Meanwhile, the DTN Meteorlogix forecast said a dry spell is developing and shows signs of lingering through much of next week in Argentina and south-central Brazil. Conditions are the most critical in northern Parana through Mato Grosso do Sul in south-central Brazil. In this area, temperatures will be near or at 100 degrees Fahrenheit for daytime highs by the end of this week through the weekend.

 

Argentina's crops are in favorable condition because of recent rainfall. Still, a 10-day stretch of dry weather during the heart of the growing season may begin to stress the soybean crop by the end of next week, Meteorlogix added.

 

In pit trades, Citigroup, Refco and Tenco each bought 300 March, and RJ O'Brien bought 400 March. Sellers were scattered among various commission houses with commodity funds net sellers on the day of 1,000 lots.

 

South American soybean futures finished lower. The March futures ended 5 cents lower at US$5.97.

 

 

SOY PRODUCTS

 

Soymeal futures carved out moderate losses during the day, pressured by speculative selling. Worries over the impact of bird flu on global feed demand attracted fresh selling to extend the market's current move to six-week lows.

 

Soyoil futures ended modestly lower, managing to find stability after selling pressure lost momentum amid the inability of March futures to challenge support at the December low of 20.98, traders said. Soyoil/soymeal spreading helped stem the tide of the market's early losses as well. March oil share ended at 37.35%, and the March crush was at 57 1/2 cents.

 

In soymeal trades, Cargill bought 800 March and Fimat bought 300 March. On the sell side, ABN Amro, RJ O'Brien, Rand Financial and Tenco each sold 300 March, and Man Financial sold 400 March. Commodity funds were estimated sellers of 2,000 lots.

 

In soyoil trades, Calyon Financial and Fimat each bought 300 March, and Rand Financial bought 400 March. JP Morgan sold 800 March, Citigroup sold 400 July, and Fimat sold 500 March. Commodity funds were net sellers on the day.