January 23, 2008

 

CBOT Soy Review on Tuesday: Sharply lower on outside market jitters

 

 

Chicago Board of Trade soybean futures ended sharply lower Tuesday, influenced by weakness in global equity markets amid fears of a recession, analysts said.

 

March soybeans ended 24 1/2 cents lower at US$12.39 1/2, July soybeans finished 26 3/4 cents lower at US$12.70 3/4, and November soybeans ended 37 3/4 cents lower at US$12.17 1/2. March soymeal settled US$2.40 lower at US$336.90 per short tonne. March soyoil finished 146 points lower at 51.68 cents per pound.

 

Heavy overnight losses in U.S. and world equity markets sent bearish ripples filtering through world commodity futures, but the U.S. Federal Reserve's surprise interest rate cut provided some stability to equity markets, which effectively capped losses in soybeans, analysts said.

 

Sharp losses in global equity markets early Tuesday caused enough concern that the Fed cut rates ahead of its scheduled meeting Jan 29-30, hoping to stem a U.S. recession, something that would have ripple effects around the world.

 

The Fed's move helped take some fear of aggressive fund selling out of the market, with weakness in the U.S. dollar raising ideas of potential export demand, analysts added. A lower dollar in theory supports grain prices, as it makes U.S. grain cheaper when priced in foreign currency.

 

Nevertheless, futures remained firmly planted in negative territory, as outside financial market weakness continued to overshadow fundamentals, a CBOT floor analyst said.

 

The risk of volatility with the connection of agriculture futures and equities further intertwined with index funds the big players in the market, and recent moisture increases in parts of South America kept traders in a cautious mood, as participants remained very concerned about falling asset prices, analysts added.

 

The DTN Meteorlogix forecast said crops in central Argentina continue to have moisture stress in developing corn, soybean and sunflower areas. However, some shower activity developed late last week, and more showers are possible in western growing areas Tuesday, and again later this week and during this weekend. These scattered showers are helping to stabilize crop conditions, Meteorlogix said.

 

Meanwhile, Brazil's crop weather pattern shows a much-improved trend from the end of last week. Heavier-than-expected rains through important soybean areas of Rio Grande do Sul during the weekend will maintain favorable conditions for the developing soybean crop. Favorable conditions are seen continuing across Parana through Mato Grosso, Meteorlogix said.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative funds net sellers on the day.

 

 

SOY PRODUCTS

 

Soy product futures ended lower across the board, succumbing to the broad-based weakness seen across commodities in general, analysts said. Soymeal futures ended lower, but finished well off their lows, as underlying demand and heavy losses in soyoil uncovered meal/oil spreading, analysts said.

 

Soyoil futures stumbled near two-week lows, pressured by speculative sales related to global economic uncertainties, analysts said. Fund selling was featured, with technical weakness and spillover pressure from a drop in crude oil futures adding to the defensive tonnee as well, analysts said.

 

March oil share ended at 43.41%, and the March crush ended at 70 1/4 cents.

 

In soymeal trades, Tenco bought 400 March, Citigroup sold 300 March, and Newedge USA LLC sold 400 March and 400 May. Speculative funds were net sellers on the day.

 

In soyoil trades, ADM Investor Services bought 300 March, and JP Morgan bought 400 March and 400 July. Sellers were scattered among various commission houses, with speculative fund selling estimated at 3,000 lots.