February 7, 2006

 

CBOT Soy Review on Monday: Ends weak on technicals, so America rain

 

 

Chicago Board of Trade soybean futures settled lower Monday on technical sales amid overbought conditions, improved South American soy growing weather and expectations for bearish U.S. Department of Agriculture data on Thursday, brokers said.

 

"With overseas demand for U.S. beans continuing to sputter five months into this marketing year (200 million bushels less than last year), the USDA is likely to further reduce its soybean export outlook by 30 million bushels, to 920 million, on the Feb. 9 monthly update," said Jerry Gidel, an analyst at North America Risk Management Services.

 

"If so, this year's ending stocks could rise to 535 million bushels, which would virtually tie the U.S. record carryover of 536 million bushels in 1985-86," Gidel said.

 

Other analysts agreed.

 

"We think that we continue to be in a supply bear market," said Don Roose, an analyst with U.S. Commodities, on Monday.

 

"At the same time, we think South America weather is improving, but we do respect the fact that we potentially have a La Nina pattern and that could lead to some dry conditions in the U.S. next year - and we don't have a lot of subsoil moisture to start with," he said.

 

"We think that means the market is intent in keep risk premium in the market for 'what if' scenarios because weather is the great equalizer," Roose added.

 

CBOT March soybeans settled Monday down 7 3/4 cents at US$5.87; March soymeal settled down US$3.00 at US$181.00 a short tonne; and March soyoil ended down 9 points at 22.57 cent a pound.

 

In pit trades, Rand Financial and ABN Amro each sold a net 800 CBOT March soybean futures, JP Morgan sold 500 November, Man Financial bought 500 March and 700 May, and Calyon Financial sold 500 March, brokers said. Commercials ADM Investor Services and Cargill Inc. bought 300-400 March, they noted.

 

Soybean spread trade was active Monday as traders expected the Goldman roll, or rolling back of nearby March positions in the Goldman Sachs Commodity Index, on the fifth business day of the month.

 

JP Morgan spread 500 March/May, ABN Amro spread 600 May/March; and Citigroup spread 400 March/May, brokers said.

 

CBOT South American soybean futures also ended lower Monday. The March futures settled down 7 cents at US$6.08.

 

In Argentina, scattered rains of 0.50 inch to 1.50 inches fell in soy growing areas on Friday and Saturday, while temperatures were forecast to be near to below-normal during the next seven days, according to Meteorlogix weather service.

 

The U.S. Department of Agriculture has forecast Argentina's 2005-06 soy crop at a record 40.5 million metric tonnes, compared with the previous record of 39 million a year ago; however, U.S. soy analysts have recently said they expect the USDA to lower its Argentine estimate by 500,000 tonnes on Thursday.

 

Brazil's soy belt saw mostly dry conditions to a few light rains during the weekend, Meteorlogix weather service said. Forecasts called for more light rains and cooling temperatures this week.

 

Brazil's National Commodities Supply Corp., known as Conab, said Monday, that the 2005-06 Brazilian soy harvest would be 58.1 million metric tonnes.

 

Overnight U.S. soybean export news was quiet, while the USDA on Monday reported weekly U.S. soybean export inspections totaled 21.286 million bushels, at the low end of traders' estimates but above the previous week's 20.786 million bushels.

 

 

SOY PRODUCTS

 

Soymeal futures ended lower Monday, with speculative sales accelerating as nearby March fell below its key 50- and 100-day moving averages of US$185.50 and US$181.40 per tonne, respectively.

 

March oil share ended at 38.40%, and the March crush was at 59 1/2 cents.

 

Soyoil futures closed lower in a correction from Friday's 1-month highs despite light commercial buying, brokers said.

 

In soymeal trades, commodity funds were net sellers, led by ABN Amro's sale of 300 March and 100 May, brokers said. JP Morgan bought 300 March while ADM Investor Services was a light buyer of May and Bunge was a light buyer of March.

 

Tenco Inc. spread 250 March/May while R.J. O'Brien spread 200 March/May, brokers said.

 

In soyoil trades, commodity funds were net sellers, led by Citigroup's sale of 400 March, 200 July and 100 December, brokers said. The Refco division of Man Financial sold 400 March; R.J. O'Brien, Tenco Inc., Calyon Financial and JP Morgan each sold 300 March; and Cargill Inc. bought 300 March, they noted.