March 5, 2010

 

CBOT Soy Review on Thursday: Stumble; dollar strength, fundamental weakness

 

 

Chicago Board of Trade soy futures tumbled Thursday, backpedaling to their lowest levels in three weeks on broad-based commodity weakness and a lack of fresh supportive news.

 

CBOT March soy ended 22 cents, or 2.30%, lower at US$9.32 1/2, and May soy settled 21 1/2 cents, or 2.23%, lower at US$9.42.

 

The bearish influence of a stronger U.S. dollar, an advancing South American soy crop harvest and limited export interest served as the underlying drivers of the day's losses.

 

Sluggish weekly export sales data revealing limited Chinese interest added another bearish twist for traders to digest, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

The ability of active contracts to challenge underlying support levels uncovered pre-placed sell orders to accelerate the declines.

 

Its tough to rally a market in the face of a record-size South American harvest, particularly with the U.S. dollar recapturing the losses it incurred Wednesday, Scoville said.

 

Growing world soy stocks with producers in Latin America and the U.S. still holding large caches of inventories that will soon need to be moved into the market is seen limiting rallies in the market, according to a market note from AgResource Company.

 

Speculative funds were estimated sellers of 6,000 lots in soy, 3,000 lots in soymeal and 2,000 lots in soyoil. Fund activity is a measure of investment money flow in the market.

 

 

Soy Products

 

Soy product futures ended lower in unison with soy. The bearish influence of outside markets and technical and fundamental pressure combined to pin prices in negative territory. Soyoil futures dropped to a three-day low, but continued to gain value in the overall soy crush versus soymeal. Adjustments in the meal/oil spread relationship limited soyoil losses, but weakness in crude oil and soy kept futures on the defensive, traders said.

 

Soymeal futures tumbled, dropping to their lowest levels since April. The market succumbed to investor selling in the face of declining export and domestic demand, reflective of softening cash prices.

 

March soymeal settled US$8.60, or 3.23%, lower at US$257.90, and the May contract dropped US$9.40, or 3.52%, to US$257.90 per short tonne. March soyoil retreated 39 points, or 0.98%, to 39.63 cents per pound, while the May contract settled 40 points, or 0.99%, lower at 40.00.

 

May oil share was 43.53% while the May soy crush ended at 65 1/2 cents.