January 21, 2010

 

CBOT Soy Review on Wednesday: Extend down turn; dollar, supply fears weigh

 

 

Chicago Board of Trade soy futures ended lower Wednesday, extending its downtrend on U.S. dollar strength and bearish supply outlooks.

 

CBOT March soy ended 13 1/2 cents or 1.4% lower at US$9.50, and May soy settled 13 1/2 cents or 1.4% lower at US$9.56 3/4.

 

Speculative funds were estimated sellers of 5,000 lots in soy, 2,000 lots in soymeal and 3,000 lots in soyoil.

 

Sharp gains in the U.S. dollar served as the catalyst for broad based commodity weakness, with technically inspired selling accelerating the losses, as prices slipped to new 3-month lows, analysts said.

 

A firm dollar reduces traders' appetite for risk and makes U.S. commodities less attractive to foreign buyers, analysts said.

 

The dollar was the driving force behind the day's drop, but bearish fundamental influences associated with rising South American production prospects and the threat of sagging Chinese demand continued to weigh on the market.

 

Fears of declining Chinese demand were aided by news of a tighter monetary policy for the Asian nation.

 

Local Chinese media Wednesday cited unnamed sources as saying that banks had been told to stop new loans, lending weight to recent indications that China was moving to further tighten lending growth.

 

Meanwhile, CBOT soy remain in a bearish trend, unable to gain any upside traction in the absence of fresh supportive news to underpin prices.

 

The ability of the March contract to dip below the November low of US$9.55 3/4 attracted additional selling, as its was seen as another bearish signal for market engulfed in a 2 1/2 week, US$1.24 3/4 down turn from the Jan 4 session high.

 

U.S. Department of Agriculture's weekly export sales report, normmaly released on Thursday will be postponed until Friday 8:30 a.m. EST due to Monday's Dr. Martin Luther King Jr. Holiday.

 

 

Soy Products

 

Soy product futures ended lower across the board, backpedaling in unison with soy. Soyoil futures carved out a new 3-month low, garnering additional pressure from a sharp drop in crude oil futures and underlying weakness from reduced soyoil usage due to an idle biodiesel industry, analysts said.

 

Soymeal futures ended lower with the rest of the complex, influenced by strength in the U.S. dollar.

 

March soymeal settled at US$4.70 or 1.6% lower at US$286.20. March soyoil fell 58 points or 1.6% to 36.57 cents per pound.

 

March oil share was 38.9% while the March soy crush ended at 82 cents.