February 28, 2007

 

CBOT Soy Review on Tuesday: Closes lower in correction; funds sell

 

 

Chicago Board of Trade soybean futures closed sharply lower Tuesday in a corrective break from recent gains and amid fund liquidation, traders and analysts said.

 

March soybeans closed 15 1/4 cents down at US$7.63 1/2, and May soybeans ended 15 3/4 cents lower at US$7.78 3/4. It was the lowest close for May soybeans since Feb. 15.

 

March soymeal finished down US$4.10 at US$223.50 per short tonne, while March soyoil closed 57 points lower at 30.14 cents per pound.

 

The declines followed strong gains in soybeans last week, traders and analysts noted. The market was in an overbought condition due for a correction, they said.

 

"I think this is definitely the corrective break everybody's been waiting for," said Doug Harper, analyst at Brock Associates.

 

Funds sold an estimated 8,000 contracts. Sell-offs in the outside and neighboring grains markets added to the negative tonnee and provided spillover weakness, floor traders said.

 

In pit trades, Term Commodities bought 1,000 May, and Rand Financial bought 700 May. USA bought 500 May and sold 1,500 May. Fimat sold 1,000 May, while Man Financial sold 600 May and UBS sold 700 May. Citigroup, Iowa Grains and Rosenthal each sold 500 May. Tenco spread 1,000 Nov/July.

 

Follow-through selling from Monday's weak technical close in CBOT corn and wheat weighed on prices early, a floor trader noted. End-of-the-month profit-taking also was a feature that will likely continue Wednesday, Harper added.

 

It's harder to say whether the correction will continue beyond Wednesday because a new month begins, analysts said. Market participants are looking ahead to the USDA Outlook Forum on March 1-2, they said.

 

Some analysts said steep overnight losses in China's stock market spooked the commodities markets and further pressed on prices. The stock market decline, along with last week's interest rate increase by the Bank of Japan, raised concerns about liquidity drying up and the markets sold off as a result, one analyst said.

 

The activity in China may have contributed to an "overall bearish attitude" in equity and commodity markets, Harper said. He added, however, that "corn soybeans and wheat were looking for a reason to have a corrective setback."

 

"China just might have been the excuse, he said.

 

There was little other fresh news out to direct prices, setting the stage for a mainly technical trade, analysts noted.

 

First notice day for the March soybean, soyoil and soymeal contracts is Wednesday. Traders and analysts said they expected heavy deliveries amidst large supplies and weak basis levels.

 

Several floor traders said they expected soybean deliveries between 500 and 1,000 contracts, while analysts estimated deliveries could be as high as 3,000 contracts.

 

As of Monday, there were 2,617 soybean contracts registered for delivery, according to the CBOT Registrar's office.

 

 

SOY PRODUCTS

 

CBOT soy product futures ended in negative territory on fund liquidation and spillover weakness from other markets, traders said. The grains markets, along with gold and silver, were weaker, providing a negative tonnee, a floor broker added.

 

Funds sold an estimated 2,500 soyoil contracts and 1,000 soymeal contracts.

 

In soymeal pit trades, JP Morgan sold 400 May and bought 300 May. Man Financial bought 300 may, while ADM bought 300 May and sold 300 May and 300 July.

 

In soyoil trades, JP morgan bought 1,200 May and sold 300 May. UBS bought 400 May, and Man Financial sold 400 May. Rand Financial spread 1,000 March/May.

 

Deliveries against the March soymeal contact are estimated at none to 1,000 contracts, while expectations for March soyoil deliveries range between 800 and 2,400 contracts.

 

As of Monday, there were 8,441 soyoil contracts and 657 soymeal contracts registered for delivery, according to the CBOT Registrar's office.