January 20, 2010

 

CBOT Soy Review on Tuesday: Sets 2-month low; lacks underpinning support

 

 

Soy futures on the Chicago Board of Trade stumbled Tuesday, backpedaling to new two-month lows in active contracts on a lack of fresh supportive news to underpin the market.

 

CBOT March soy ended 10 1/2 cents lower at US$9.73 1/2, and March soy settled 10 cents lower at US$9.70 1/4.

 

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

 

Futures broke out of a consolidative phase on technical charts, extending last week's declines amid bearish South American crop potential, technical pressure and strength in the U.S. dollar.

 

Non-threatening South American weather continues to promote record crop outlooks and, with world meal values softening, the path of least resistance remained down, said Chad Henderson, analyst with Prime Ag Consulting.

 

The ability of the March contract to dip below last week's low attracted additional selling, with traders eyeing the November low near US$9.55 as the next downside price target, Henderson said.

 

A technical analyst said a concentrated push in March soy futures prices below solid technical support at the January low of US$9.69 suggests the beginning of a downside "breakout," meaning March soy could fall to around US$8.70 on daily charts.

 

Record soy crop outlooks for Brazil, higher production in Argentina and the potential for less buying from China served as bearish signals for the market. Prices are faltering as Brazil's harvest moves ahead, particularly with the January crop reports and index-fund rebalancing out of the way, analysts said.

 

The market did garner mild support from end-user pricing on the break and a fresh sale to China. However, the threat of demand shifting to South American origins moving forward damped the demand enthusiasm, a trader said.

 

Meanwhile, new crop/old crop spreading was featured, as traders bought deferred months while selling nearby contracts amid the uncertainty that looms for spring acreage and summer growing season, analysts added.

 

 

Soy Products

 

Soy-product futures ended lower in unison with soy. Soymeal futures slipped on softening world meal values amid the threat of competition from South American origins. Soyoil futures ended lower, sinking to a 2 1/2 month low on technical pressure and weakness in world vegoil markets. Lingering concerns about reduced U.S. soyoil demand from the biodiesel industry as it struggles without a blender credit aided the defensive tonnee, analysts said.

 

March soymeal settled US$0.80 lower at US$290.90. March soyoil fell 38 points, or 1.0%, to 37.15 cents per pound.

 

March oil share was 39.04% while the March soy crush ended at 85 1/4 cents.