January 21, 2009

 

CBOT Soy Review on Tuesday: Sinks on profit-taking; markets eye weather

 

 

Chicago Board of Trade soybean futures sank Tuesday on profit-taking, although dry weather in South America remains an underlying worry for the market, traders said.

 

March soybeans closed down 28 cents at US$9.92 per bushel. March soyoil slid 78 points to 33.81 cents per pound, and March soymeal finished down US$7 at US$309 per short tonne.

 

Prices tumbled as traders booked profits after recent rallies fueled by expectations that dryness would lower production in Argentina, a CBOT floor analyst said. March soybeans hit an open outcry session low of US$9.79, the contract's lowest price since Thursday, before trimming losses.

 

There was some talk the market has absorbed worries about South American crop losses for the near term, a trader said. However, prices could rise again if the weather pattern remains dry, he said.

 

The market has probably factored in an Argentine soybean crop of about 47 million tonnes or 48 million but not a crop in the low 40 million range, said Dave Marshall, an independent marketing advisor and commodities broker. The U.S. Department of Agriculture projects Argentine production at 49.5 million.

 

"I think we've factored them in for the short term, but I don't think we've fully factored in a yield loss of what some of these analysts in South America are predicting," Marshall said. "We haven't seen a pattern shift yet. If by next Monday the pattern hasn't shifted, then (the market's) got to re-address that situation" of whether a 47 million or 48 million crop is still reasonable, he said.

 

Private forecaster T-Storm Weather said it was "far from convinced that a wetter pattern will develop across Argentina next week." Some rain is expected in central crop areas during the weekend, the firm said in a forecast.

 

"A sudden pattern change toward wetter weather is not foreseen over the next 10 days in Argentina, which increases the importance of coverage and amounts from Saturday night through Sunday night - especially with heat coverage to expand through Saturday afternoon," T-Storm said.

 

Weather in South America is important for the market because soybeans are near critical growing stages. Argentina is the world's No. 3 soybean producer and exporter behind the U.S. and Brazil.

 

Commodity funds sold an estimated 4,000 contracts at the CBOT. Weakness in soybeans weighed on the neighboring corn and wheat markets, traders said.

 

 

Soy Products

 

Soy product futures closed lower with soybeans, with soyoil hitting a fresh low for the year. March soyoil hit a session low of 33.12, its lowest price since Dec. 31, and March soymeal hit an open outcry session low of US$305.80, its lowest price since Thursday.

 

Profit-taking hit the whole soy complex, traders said. The stronger U.S. dollar was seen as bearish, as a firm dollar makes U.S. commodities less attractive to foreign buyers, they said.

 

Funds sold an estimated 1,000 soymeal contracts and 1,000 soyoil contracts.