January 24, 2009

 

CBOT Soy Review on Friday: Lower, stumbles late; Argentine uncertainty

 

 

Soybean futures on the Chicago Board of Trade ended lower Friday, stumbling from earlier gains on late position evening amid uncertainty tied to the weekend rain potential for drought-stricken Argentina crops.

 

CBOT March soybeans finished 3 cents lower at US$10.09 a bushel. March soy meal settled US$0.10 higher at US$318.30 a short tonne. March soyoil finished 7 points higher at 33.60 cents a pound.

 

The market experienced volatile price action, erasing strong intraday gains down the stretch, as traders took a tentative approach heading into the weekend in the face of forecasts for rain moving into Argentina Sunday, analysts said.

 

Futures sustained price strength for most of the day, supported by lingering drought conditions in Argentina and the continued bullishness of export demand, said John Kleist, broker/analyst with Allendale Inc.

 

The trade took a bullish approach on strong demand from China and speculation that Argentina rains, as forecast, will not provide any long-term relief to Argentina's drought conditions, Kleist added.

 

The market spiked to new highs for the week near midday, buoyed by private forecasters taking some rain out of weekend outlooks. However, the market's sensitivity to weather uncovered profit-taking, as the forecast rain and outlooks for slower export demand next week as China celebrates the Lunar New Year, took the edge off prices, analysts said.

 

Volatile trade could be on tap for Sunday's overnight session, as traders eye rain totals from moisture expected to move through Argentina on Sunday, Kleist said.

 

The DTN Meteorlogix weather forecast said that during the coming weekend, a cold front will move through Argentina's central crop belt. This front will produce some scattered thunderstorm activity. Rainfall potential with these showers appears to be up to one inch with locally heavier amounts, favoring the northern and eastern areas. Coverage will be from 40% to 70% of the central belt.

 

Additional light showers may develop in the north during Sunday night or Monday, Meteorlogix said. However, the coming rains may not be enough to significantly change the situation in the primary corn, soybean and sunflower belts, Meteorlogix added.

 

Argentina's soybean output potential is being threatened by what contacts within the nation say is the worst drought in more than 100 years, Allendale Inc. said in a research note.

 

With the brutal drought baking Argentina's developing soy and corn crops, yields and total production are likely to fall very sharply, the Buenos Aires Cereals Exchange said in a notice Friday.

 

Soy production is seen falling between 17% and 25% from last season, the exchange said. That would mean production of just 34.5 million to 38.2 million tonnes. USDA is expecting Argentina to grow 49.5 million tonnes this season.

 

The U.S. Department of Agriculture reported total weekly soybean export sales were a net 1,329,000 metric tonnes for the week ended Jan. 15. Sales for 2008-09 were a net 1,324,800 metric tonnes. The primary buyer was China with 765,700 metric tonnes. USDA also announced private exporters reported the sale of 145,000 metric tonnes of soybeans to China for delivery in the 2008-09 marketing year.

 

 

SOY PRODUCTS

 

Soy product futures ended mixed, retracing early gains on pre-weekend position squaring in the face of uncertain rain potential for Argentine crops. Soymeal spiked to four-month highs on the Argentine worries and supportive weekly export sales. However, once soybeans retreated and prices penetrated technical support levels, buyers ran for cover, traders said.

 

Soyoil managed to end higher, but well off its highs. Adjustments in the meal/oil spread after a week of declining oil share helped underpin prices, analysts said.

 

March oil share ended at 34.63% and the March crush ended at 60 3/4 cents.