February 26, 2010

 

CBOT Soy Review on Thursday: Bearish market influences weigh on prices

 

 

Chicago Board of Trade soy futures sank to one-week lows Thursday, pressured by a plethora of bearish market influences.

 

CBOT March soy ended 14 cents lower, or 1.47%, at US$9.41 1/2, and May soy settled down 13 cents, or 1.35%, at US$9.63.

 

Signs of waning demand, with weekly export sales and January crushing data falling below trade expectations, provided fresh bearish fundamental news to pressure prices, analysts said.

 

The market finds itself under increased pressure from outlooks for demand to shift to South America, as Brazil and Argentina prepare to move deeper into their potentially record-setting soy harvests.

 

As the South American harvest expands, traders anticipate increased hedge pressure from Latin America.

 

Sellers also received "tremendous encouragement from outside markets" for most of the day, with early gains in the U.S. dollar coupled with sharp losses in crude oil futures sending buyers running for cover, said Victor Lespinasse, analyst with Grainanalyst.com.

 

The domestic cash market is now closely linked to energy prices, as more than 10% of all U.S. soy oil is turned into biodiesel fuel.

 

However, the markets managed to settle near session highs, garnering support from a partial recovery in outside markets. The U.S. dollar was lower when CBOT grain and soy ended, with the stock market paring its losses.

 

Speculative funds were estimated sellers of 6,000 lots in soy, 2,000 lots in soymeal and 4,000 lots in soyoil. Speculative funds were estimated sellers of 2,000 lots in soymeal. Fund activity is a measure of investment money flow in the market.

 

 

Soy Products

 

Soy product futures settled lower, backpedaling on bearish supply-side fundamentals. Soyoil futures stumbled, retracing Wednesday's gains on the bearish influence of higher-than-expected January stocks reported in the Census crush report and sharp declines in crude oil futures. However, soyoil managed to gain product value share versus soymeal on spreads, with solid weekly export sales providing some underlying strength.

 

Soymeal futures dropped to two-week lows, succumbing to speculative selling. The selling was in response to signs of slowing demand amid the potential shift of world importers' buying interest to South America. Lower-than-expected weekly export sales and higher-than-anticipated January stocks served as bearish demand signals, analysts said.

 

Soymeal 2009-10 weekly sales were a net 81,900 tonnes. Trade estimates ranged from 100,000 to 175,000 tonnes. Soyoil commitments were 40,200 metric tonnes. Analysts had forecast sales between 10,000 and 20,000 tonnes.

 

The Census Bureau said soymeal stocks jumped to 630,497 short tonnes in January. Meal stocks came in above the average analyst estimate of 521,400 tonnes. The bureau says soyoil stocks were 3.239 billion pounds, compared with the average analyst estimates of 3.123 billion.

 

March soymeal settled US$4.80 lower, or 1.73%, at US$272.10, and the May contract dropped US$5, or 1.84%, to US$267.20 per short tonne. March soyoil lost 52 points, or 1.33%, to 38.53 cents per pound, while the May contract settled 53 points lower, or 1.34%, at 38.97.

 

May oil share was 42.2% while the May soy crush ended at 66 1/2 cents.