January 25, 2007

 

CBOT Soy Review on Wednesday: Finish lower without fresh bullish news

 

 

Chicago Board of Trade soybean futures ended weaker Wednesday in a correction to gains Tuesday and with a lack of fresh bullish news to support prices, analysts said.

 

March soybeans closed down 12 1/4 cents at US$7.15 a bushel, and May soybeans finished 11 1/2 cents lower at US$7.30 1/2. March soymeal settled US$1.90 lower at US$208.40 per short tonne, and March soyoil ended 70 points down at 29.23 cents per pound.

 

The declines came after soybean futures climbed higher Tuesday on expectations that President Bush's State of the Union address would promote increased usage of biofuels, sources noted. The speech, however, did not contain enough surprises to attract new buying Wednesday and instead was seen as a catalyst for liquidation, an analyst said.

 

There also were ideas that Tuesday's advances were overdone, and the market needed to give back the gains, he added.

 

"It was a classic 'buy the rumor, sell the fact' set-up," the analyst said.

 

Interest in alternative fuels affects soybeans because soyoil can be used to produce biodiesel, a processed fuel that can replace petroleum-based diesel fuel. Corn-based ethanol is another alternative fuel.

 

CBOT corn futures also finished lower Wednesday and did not challenge soybeans to move higher during the day session, a floor broker noted. Corn and soybeans are in a race for 2007 acreage, analysts have said.

 

Good growing weather in South American soybean areas and expectations for a record crop were fundamentally bearish, a source said.

 

The DTN Meteorlogix weather firm reported South American crops continue to enjoy a "generally favorable weather pattern." Periodic showers will occur in both Brazil and Argentina, along with temperatures of normal to above-normal values, during the balance of this week, according to the firm.

 

"There is some concern about the occurrence of soybean rust in Mato Grosso, Brazil," Meteorlogix reported. "However, the shower patterns are intermittent, thus allowing rust control chemical applications to proceed if needed."

 

Brazil's commodities market, meanwhile, sees an increase in soy production in South America due to soy field reductions in the U.S. in favor of corn to feed local ethanol demand, sources said.

 

The region is already the top worldwide soy producer, with Argentina and Brazil harvesting over 100 million metric tonnes of soybeans combined compared to some 87 million tonnes in the U.S. But as the U.S. government continues to promote ethanol and alternative fuel usage, soy's move south is becoming more evident, sources said.

 

Looking ahead, the U.S. Department of Agriculture is scheduled Thursday to release its weekly export sales report for the week ended Jan. 18. Analysts surveyed by Dow Jones Newswires predicted soybean sales would fall between 500,000 and 700,000 metric tonnes.

 

The U.S. Census Bureau is slated to release its monthly soy crush report on Thursday. U.S. soybean crush for December is expected to be 156.1 million bushels, up from the November figure of 155.0 million, according to a separate survey of analysts.

 

 

SOY PRODUCTS

 

CBOT soy product futures took back gains earned Tuesday on bullish expectations about Bush's speech, floor sources said. There was further pressure from fund liquidation and spillover weakness from crude oil futures, they noted.

 

Funds sold an estimated 7,000 soyoil contracts and 1,000 soymeal contracts, a source noted.

 

In soymeal pit trades, Bunge bought 600 March, while Fortis sold 500 March. In soyoil pit trades, Rand Financial sold 500 March, and Man Financial sold 400 March. Funds sold an estimated 2,000 contracts.

 

Soymeal export sales for the week ended Jan. 18 are expected to range from 75,000 tonnes to 150,000 tonnes, according to the analysts surveyed. Soyoil sales are estimated to total between nothing and 10,000 tonnes.

 

In the Census soy crush report, soyoil stocks are seen declining to 3.007 billion pounds, down from 3.074 billion the previous month. December soymeal stocks are seen decreasing to 357,000 short tonnes, down from the 373,563 tonnes reported for November.