February 13, 2007

 

CBOT Soy Review on Monday: Overbought condition pressures prices

 

 

Chicago Board of Trade soybean futures finished lower Monday on ideas the market is in an overbought condition and as carryover weakness from energy futures weighed on prices, sources said.

 

March soybeans ended 4 cents down at US$7.45 1/4, while May soybeans closed 3 3/4 cents lower at US$7.61 3/4. March soymeal closed up US$1.00 at US$218.90 per short tonne, and March soyoil ended down 45 points at 29.89 cents per pound.

 

Soybean futures saw solid gains last week and settled higher Friday after setting new contract highs, analysts noted. Those advances "really left room to pull back today," said Tim Hannagan, analyst with Alaron in Chicago.

 

With few fresh inputs to trade on, soybeans took direction from outside markets, floor sources added. Losses in crude oil spilled over into soybeans, they said.

 

There was also some pressure from chatter that export demand may be starting to shift from the U.S. to South America, Hannagan added.

 

The U.S. Department of Agriculture reported weekly U.S. soybean inspections for the week ended Feb. 8 totaled 25.844 million bushels, above trade estimates of 20 million to 24 million.

 

A week earlier, however, inspections were 39.473 million. The decline sparked bearish speculation about the seasonal demand shift, Hannagan said.

 

"Right away, it fosters this thinking of, 'Here we go. We're starting to see our seasonal slowdown in demand,'" Hannagan said.

 

Funds were active during the day session and further pressured prices by selling 2,500 contracts, sources added.

 

In pit trades, UBS sold 800 May, while Man Financial sold 500 March and Rand Financial sold 400 March. Calyon bought 500 November. Fortis spread 800 May/March.

 

Looking forward, analysts said they expected to see gains reappear in a "Turnaround Tuesday" scenario. Traders are still positioning themselves to be long ahead of the March 30 prospective planting report from U.S. Department of Agriculture, Hannagan added.

 

"Everybody wants to be long," he said. "We haven't broken any technical support."

 

There also are bullish concerns about the crop in South America, a floor trader noted. Unfavorable weather could still lower the quality of the crop or delay harvest, he said.

 

Brazil's northern soybean provinces of Mato Grosso and Mato Grosso do Sul are locked in a weather pattern which features daily episodes of showers and thunderstorms, DTN Meteorlogix reported. This pattern is set to continue during this week, the weather firm added.

 

It threatens to bring harvest delays to fields in northern Mato Grosso, which are ready for harvest, and to enhance the conditions for development of soybean rust in fields, which are now in the pod-filling stage, Meteorlogix said.

 

 

SOY PRODUCTS

 

CBOT soy product futures settled mixed.

 

Soyoil tumbled lower under pressure from weakness in crude oil futures, floor sources said. There also was some follow-through technical selling after soyoil Friday saw a bearish outside day down on the daily charts, a trader added.

 

Funds boosted soymeal by buying an estimated 1,200 contracts and weighed on soyoil by selling an estimated 2,000 soyoil contracts. March soymeal felt technical strength after advancing to a new contract high on Friday, the trader said.

 

In soyoil pit trades, Rand Financial sold 800 March, and Tenco sold 500 May. UBS sold 600 July soyoil and bought 500 July soymeal. Fortis spread 2,000 May/March soymeal