January 26, 2010

 

CBOT Soy Review on Monday: At 3 1/2 month lows on South America outlooks

 

 

Soy futures at the Chicago Board of Trade backpedaled Monday, dropping to 3 1/2 month lows on bearish South American crop outlooks and technical selling.

 

CBOT March soy ended 11 cents, or 1.16%, lower at US$9.40 1/2, and May soy settled 9 3/4 cents, or 1.02%, lower at US$9.49 1/2.

 

Speculative funds were estimated sellers of 5,000 lots in soy, 1,000 lots in soymeal and 2,000 lots in soyoil.

 

The prospect of record South American crops following bumper U.S. production in 2009 served as the catalyst to keep prices grinding lower in the absence of fresh news to buoy prices, analysts said.

 

The potential for big crops in Brazil and Argentina managed to trump any need for a technical correction, despite concerns that the market's 11% drop in prices in the last two weeks had left futures oversold.

 

Declines accelerated once the most active March future penetrated support at last week's low of US$9.40 3/4. The breach of technical support uncovered pre-placed sell stop orders, a CBOT floor analyst said.

 

In the absence of fresh supportive news, the path of least resistance remained lower, as a lack of new export news and a lack of definitive support from outside markets left market bulls without any good buy signals, said Dale Durchholz, analyst with Agrivisor.

 

However, looking ahead, "it's risky chasing the short side of the market at current levels," Durchholz said. "We don't have this big South American crop in the bin yet and, with record U.S. soy usage and Argentina crops facing their critical make or break development stage for yields, there is still a bit of uncertainty looming in the market," he added.

 

The DTN Meteorlogix weather forecast said there is adequate soil moisture reserves in Argentina, but temperatures are rising. They may reach triple digits this week, and the outlook for showers is that any rain that falls will be light and scattered. Argentina soil moisture is adequate for the time being, but the situation bears watching, Meteorlogix said.

 

 

Soy Products

 

Soy-product futures ended lower across the board, succumbing to speculative selling in the face of potential strong competition from record projected South American supplies. Technical selling added to the defensive tonnee, with soymeal and soyoil futures carving out two-month and three-month lows, respectively. Soyoil managed to gain some product share on spreads, benefiting from higher crude-oil futures prices, traders said.

 

March soymeal settled US$3.40, or 1.19%, lower at US$283.00. March soyoil dropped 21 points, or 0.57%, to 36.50 cents per pound.

 

March oil share was 39.21% while the March soy crush ended at 83 3/4 cents.