March 5, 2008

 

CBOT Soy Review on Tuesday: Plunge; soyoil weakness, profit-taking

 

 

Chicago Board of Trade soybean futures ended sharply lower Tuesday, with contracts briefly plunging limit down on speculative profit-taking pressure and spillover from soyoil.

 

March soybeans ended 50 1/2 cents lower at US$14.94, May soybeans settled 48 3/4 cents lower at US$15.10 3/4, July soybeans finished 50 cents lower at US$15.20 and November soybeans ended 48 3/4 cents lower at US$13.98 3/4. May soymeal settled US$6.40 lower at US$376.80 per short tonne. May soyoil finished 200 points lower at 68.82 cents per pound.

 

The sell-off in soybeans was generated from spillover pressure from limit-down soyoil futures, analysts said. "It was a domino effect on the entire complex, as the recent rally has been soyoil driven, so once oil cracked, soybeans and soymeal followed, a CBOT floor broker added.

 

The market was overdue for a correction, following the recent run to new all-time highs, and with Asian soybean and vegoil markets slumping overnight, futures had the impetus to retreat in unison, analysts added.

 

Rumors that China's government may sell vegetable oil from state reserves, and cut vegetable oil import tariffs to curb surging prices, helped reverse Asian prices overnight, analysts said.

 

Technically inspired selling was featured, and declines accelerated once futures penetrated underlying support levels. Broad-based selling across commodities and the advancing South American harvest helped drag futures down near their 50-cent lower daily trading limits, traders said.

 

General nervousness in commodities with most markets setting new all-time highs of late aided the market's swift retreat, as overbought conditions with prices in uncharted territory don't point to many people taking a stand in a market overdue for a correction, a floor analyst added.

 

In pit trades, speculative fund selling was estimated at 6,000 contracts. In options, JP Morgan bought 9,000 May US$20.00 calls.

 

 

SOY PRODUCTS

 

Soyoil futures were the downside leader of the complex Tuesday, ending at their 200-point lower daily trading limit.

 

The market retraced Monday's limit-up move, as speculative funds covered positions following an overnight drop in Asian vegoil markets, analysts said. Fears of a slowdown in Chinese vegoil buying, following rumors of new government measures to curb inflation, sent bearish waves filtering through global vegoils markets, analysts added.

 

Analysts said the most active May futures were synthetically trading between 67.70 and 68.20 cents per pound in the options pit.

 

Soymeal futures stumbled as well, succumbing to the broad-based speculative selling that attracted profit-taking in commodities in general, analysts said.

 

March oil share ended at 47.59% and the May crush ended at 74 1/2 cents.

 

In soymeal trades, speculative fund selling was estimated at 3,000 lots.

 

In soyoil trades, speculative fund selling was estimated between 6,000 and 7,000 lots.