March 3, 2007

 

CBOT Soy Review on Friday: Down on long liquidation, technical weakness

 

 

Long speculative liquidation and technical momentum toward the downside pressed Chicago Board of Trade soybean futures to a lower close Friday, analysts and traders said.

 

May soybeans finished down 8 1/2 cents at US$7.53 1/2, the contract's lower close since Feb. 2. November soybeans ended 8 1/4 cents lower at US$7.91 1/4, the contract's lowest close since Feb. 6.

 

May soymeal closed US$4.70 lower at US$220.90 per short tonne, while May soyoil closed 7 points higher at 30.08 cents per pound.

 

Long liquidation continued to be a feature of the day session after pushing the market to steep losses Thursday, floor traders said. Funds sold an estimated 3,000 contracts.

 

Technical pressure from volatile trading during the week also weighed on prices, an analyst added. Some profit-taking contributed to the losses, he said.

 

In pit trades, Bunge bought 1,000 May, and RJ O'Brien bought 600 May. Fimat bought 400 May, while Citigroup bought 300 May.

 

There was little fresh news out, although analysts said the U.S. Department of Agriculture's new estimate for 2006-07 U.S. planted soybean acreage seemed bearish, analysts said. The USDA said the soybean crop would cover 70.5 million acres, although estimates from several private firms have estimated planted area closer to 66 million.

 

Allendale Inc., a research and introducing brokerage firm in McHenry, Ill., on Friday estimated corn acreage at 90.760 million acres and soybean plantings at 65.927 million. Last year, corn planted area measured 78.3 million acres, and soybean acreage came in at 75.5 million.

 

Some market participants were disappointed the USDA did not lower its estimate more, analysts noted. U.S. producers are expected to plant corn on acres traditionally farmed for soybeans to take advantage of sharp demand for ethanol.

 

"I think that was a bit of a blow to the bull psychology," said John Kleist, senior analyst for Top Third Ag.

 

Spillover pressure came from declines in the neighboring CBOT corn market, traders added. Outside markets, including crude oil, silver and gold, also were weaker, although Kleist said corn is the most important leader for soybeans.

 

"Corn is the only outside market the beans are worrying about," he said.

 

Looking at soybean production in South America, there are few weather issues for crops going into this weekend, according to DTN Meteorlogix. That was bearish for trading, sources said.

 

Northern Brazil will have only scattered light thundershowers, along with above-average temperatures, this weekend, Meteorlogix said. This will be a generally favorable pattern for harvest progress, the weather firm added.

 

In southern Brazil through Argentina, periods of thunderstorms will alternate with near-normal temperatures to bring generally favorable filling weather for soybeans, the firm reported.

 

Brazil soy farmers will see record yields in the ongoing 2006-07 soy crop, according to agronomists from Agroconsult, currently conducting a national tour.

 

Production averages in states like Mato Grosso do Sul and Parana are easily over 50 60-kilogram bags per hectare, said Andre de Bastiani, an agronomist at local agribusiness consultancy leading the crop tour in Mato Grosso do Sul and Parana this week.

 

 

SOY PRODUCTS

 

CBOT soy product futures settled mixed as losses in the soybean market spilled over into soymeal, floor traders said. There are ideas soymeal is overbought, a trader noted.

 

Funds sold an estimated 1,000 soymeal contracts and bought an estimated 3,000 soyoil contracts.

 

In soymeal pit trades, UBS bought 500 May, and JP Morgan bought 400 July. ADM and Fortis each sold 300 May.

 

Buyers were scattered in soyoil trades. JP Morgan bought 500 May.