February 4, 2009

 

CBOT Soy Review on Tuesday: Lower; extracts premium on Argentine rains

 

 

Soybean futures on the Chicago Board of Trade ended lower Tuesday, continuing to retreat on bearish near term weather conditions for South American crops.

 

CBOT March soybeans finished 13 1/2 cents lower, at US$9.46. March soy meal settled US$4.40 lower, at US$301.80 per short tonne. March soyoil finished 23 points lower, at 31.53 cents per pound. In pit trades, speculative fund selling was estimated at 4,000 lots.

 

The market effectively took weather premium out of prices during Monday and Tuesday's price slide, said Mike Zuzolo, analyst with Risk Management Commodities Inc.

 

Heavier-than-expected overnight rains and forecasts for additional showers later this week are expected to benefit Argentine crops, particularly with room for crop improvement, as soybeans head into their critical pod fill stage of development, Zuzolo added.

 

Futures dipped to their lowest levels since late Dec., with technically inspired selling in the absence of fresh fundamental news or definitive outside market influences aiding the declines.

 

However, futures finished well off their intra-day lows as traders covered shorts off the break as the looming uncertainties of demand and crop potential continued to promote cautious activity, said Tim Hannagan, analyst with Alaron Trading.

 

Nevertheless, weather remained the dominant issue, with weather conditions seen as largely beneficial to both Argentina and Brazil crops, Hannagan said. The worst of the drought fears seem to be abating, with cooler temperatures and fairly wet conditions moving from Argentina to Brazil, Hannagan added.

 

T-storm Weather, LLC said strong energy is likely to trigger strong to severe thunderstorms in Argentina's eastern La Pampa and western Buenos Aires Wednesday night, which is slightly further southwest than where thunderstorms initiated Monday night. These will then move across Buenos Aires on Thursday, with the northern edge of significant rainfall extending from central Cordoba through central Santa Fe and Entre Rios, T-storm forecasts. Significant rain totals also appear to be a decent probability from Chaco/Santiago del Estero and northern Santa Fe on Thursday night.

 

The best chance for widespread rain totals in excess of 1 inch is across La Pampa, Buenos Aires, far southern Cordoba, southern Santa Fe, and Entre Rios. If correct, then most soybeans in Argentina will have received 1 to 2.5 inches this week, with localized totals in excess of 4.5 inches, T-storm reports in the forecast.

 

 

SOY PRODUCTS

 

Soy product futures stumbled in step with soybeans on improved crop outlooks for Argentina.

 

Soyoil futures finished lower, but despite setting a 6-week low, emerged as the strongest leg of soy complex Tuesday. A supportive private export sale announcement from U.S. Department of Agriculture and price strength in crude oil futures limited losses, analysts said. Light profit taking on meal/oil spreads helped soyoil gain some product share, traders added. Soymeal futures set a 3-week low on an intra-day basis.

 

March oil share ended at 34.31% and the March crush ended at 64 3/4 cents.

 

USDA announced Tuesday private export sales of 25,000 metric tonnes of U.S. soyoil for delivery to unknown destinations in the 2008-09 marketing year.

 

In pit trades, speculative fund buying was estimated at 1,000 lots in both soyoil and soymeal.