February 24, 2010

 

CBOT Soy Review on Tuesday: Ends lower; retreats from early gains

 

 

Chicago Board of Trade soy futures ended lower Tuesday, backpedaling from strong early gains after buying interest became exhausted.

 

CBOT March soy ended 9 cents, or 0.94%, lower at US$9.52 1/2, and May soy settled 9 1/2 cents, or 0.98%, lower at US$9.59 1/2.

 

Futures experienced two-sided trading activity, rallying to five-week highs initially before major moving-average chart resistance capped upside movement, traders said. The inability of the market to attract follow-through buying once prices challenged higher levels uncovered pre-placed sell orders to send values retreating.

 

A surge in the U.S. dollar sparked broad-based weakness throughout the commodity sector as well. A stronger dollar makes U.S. exports less attractive in world markets and also increases traders' aversion to risk.

 

Fundamentally, futures were pressured by the threat of record South American crops creating increased competition for U.S. supplies and fears that a wet spring could delay corn seedings and increase U.S. soy plantings. Corn must be planted earlier than soy because it takes longer to mature.

 

Soy climbed to session highs in early trade, buoyed by strong seasonal buying trends and the cancelation of deliverable CBOT soy receipts. The canceled receipts gave a boost to front-month contracts, raising ideas of tight nearby supplies, analysts said.

 

However, as technical momentum faded and traders looked ahead to a record Latin American harvest, the influence of outside markets sent negative waves filtering through the complex.

 

Speculative funds were estimated sellers of 5,000 lots in soy, 2,000 lots in soymeal and 3,000 lots in soyoil. Fund activity is a measure of investment money flow in the market.

 

 

Soy Products

 

Soymeal futures ended lower, retreating from earlier gains as weakness in outside markets overshadowed supportive underlying demand fundamentals. However, soymeal gained overall product share value on adjustments in the meal/oil spread relationship.

 

Soyoil futures stumbled Tuesday, under pressure from investor selling in the absence of fresh supportive news for the market. Lingering worries about the overall slowing domestic usage of soyoil due to the stagnation of the biodiesel industry amid the absence of a tax-incentive credit weighed on prices, analysts said. Spillover weakness from sharply lower crude oil futures provided psychological pressure, as energy values determine the profitability of biodiesel fuel.

 

March soymeal settled US$2.10, or 0.75%, lower at US$279.60, and the May contract dropped US$1.80, or 0.65%, to US$273.90 per short tonne. March soyoil slipped 52 points or 0.52% to 38.31 cents per pound, while the May contract settled 52 points or 0.52% lower at 38.75.

 

May oil share was 41.4% while the May soy crush ended at 69 3/4 cents.