February 18, 2009

 

CBOT Soy Review on Tuesday: Tumble on economic woes, South American weather

 

 

Soybean futures at the Chicago Board of Trade ended sharply lower Tuesday, tumbling to 8 week lows on the back of bearish economic views and stabilizing South American crop conditions.

 

CBOT March soybeans dropped 52 1/2 cents, or 5.5%, to US$9.03. March soy meal settled US$14.20 lower at US$283.50 per short tonne. March soyoil finished 185 points lower at 31.15 cents per pound. In pit trades, speculative fund selling was estimated at 5,000 lots.

 

The market was met with a plethora of bearish influences Tuesday, with a stronger U.S. dollar, falling crude oil prices and collapsing stock indexes attracting sellers, said John Kleist, broker/analyst with Allendale Inc.

 

Stabilizing crop conditions in South America on recent and forecasted rains was another feature sending buyers running for cover.

 

Technical pressure was featured as well, with the inability of active contracts to hold chart support at major moving averages uncovering pre-placed sale orders to extend declines, traders said.

 

Liquidation of March positions ahead of the delivery period helped to exaggerate losses, but the combination of weak outside market factors, South American crop improvement and technical pressure was the overwhelming influence, said Kleist.

 

Looking ahead, the market has oversold signals, but without some fresh bullish news, analysts expect buyers to continue taking a cautious approach.

 

The DTN Meteorlogix Weather forecast for crop areas in Argentina and southern Brazil offers an improved outlook for rainfall at the end of the week. Thursday through Friday, rainfall is forecast in the range of 1/2 inch to 1 1/2 inches for Buenos Aires, Argentina, which produces about a quarter of the Argentina soybean crop, along with Rio Grande do Sul, Brazil, which is Brazil's third-largest soybean producer, Meteorlogix said. These rains, if they develop, would be very timely for pod-filling soybean plants.

 

 

SOY PRODUCTS

 

Soy product futures tumbled lower in unison with soybeans, influenced by bearish market views on the global economy and stabilizing crop conditions in South America, analysts said. Soyoil futures dropped over 5% from Friday's settlements, garnering additional pressure from weakness in crude oil, and a higher-than-expected January stock estimate.

 

Despite sharp declines, soymeal futures managed to gained product share on adjustments in the meal/oil spread relationship, analysts said.

 

March oil share ended at 35.46% and the March crush ended at 63 1/4 cents.

 

The National Oilseed Processors Association said January soyoil stocks totaled 2.394 billion pounds, up from 2.176 billion in December, and above the average analyst estimate of 2.233 billion. The range of estimates was 2.211 billion pounds to 2.276 billion pounds.

 

In pit trades, speculative fund selling was estimated at 2,000 lots in both soymeal and soyoil.