March 6, 2007

 

CBOT Soy Review on Monday: Slumps to one-month lows but trims losses

 

 

Chicago Board of Trade soybean futures Monday ended at their lowest levels in more than a month under pressure from weakness in outside markets and continued long speculative liquidation, analysts and traders said.

 

But prices closed well off session lows amid an apparent exhaustion of the long liquidation and a bounce in the neighboring CBOT corn market, they noted.

 

May soybeans closed down 3 cents at US$7.50 1/2 per bushel, and November soybeans ended down 3 1/2 cents at US$7.87 3/4. It was the lowest close for both contracts since Feb. 1.

 

May soymeal finished down US$0.40 at US$220.50 per short tonne, the contract's lowest close since Feb. 8. May soyoil closed 10 points lower at 29.98 cents per pound, the contract's lowest close since Jan. 31.

 

Spillover pressure from outside markets and the neighboring CBOT corn market weighed on soybean futures for most of the day session, traders said. Corn futures rebounded higher in late trading, however, and helped soybeans trim losses, they said.

 

Long speculative liquidation that began last week also continued to be a negative factor for soybeans, analysts added. Funds were active sellers again, dumping an estimated 5,000 contracts.

 

Looking ahead, it appears as thought the long liquidation may be coming to an end, said Don Roose, president of U.S. Commodities. The market responded "fairly decently" to bearish news of a good harvesting weekend in South America and to the declines in outside markets, he said.

 

"I think it's the tail end of the long liquidation," Roose said. "We had a lot of liquidation in the market. It seems like we've reached kind of equilibrium."

 

Soy yields in Brazil's No. 2 soy producing state, Parana, surprised agronomists this weekend with many farms averaging between 54 and 70 60-kilogram bags per hectare, compared to just 40 bags per hectare in 2005-06, according to consulting firm Agroconsult.

 

Of the 19 farms Dow Jones Newswires visited throughout west and north Parana between Friday and Sunday, 11 properties had yields of 54 bags or more, with six of those properties having fields yielding well more than 60 bags per hectare.

 

In northern Brazil, where harvest conditions are being closely watched, Mato Grosso had a few light showers over the weekend. Otherwise, dry and hot weather prevailed with high temperatures in the mid-90s Fahrenheit, the DTN Meteorlogix weather firm reported.

 

"This region has generally dry and warm weather this week, which is favorable for harvest," Meteorlogix said.

 

Asian soybean rust will likely reduce yields in Brazil's No. 4 soy producing state in 2006-07, although strong yields from early cycle soy might compensate for the productivity losses going forward, Agroconsult agronomists said.

 

In the U.S., the cold winter of 2006-07 appears to have set back the spread of Asian soybean rust as frost killed susceptible plant hosts in most of the Southeast.

 

In other news, weekly U.S. soybean export inspections came in below analysts' estimates and inspections from a week earlier. The news was bearish for the market, an analyst said.

 

The U.S. Department of Agriculture reported 24.829 million bushels were inspected for export for the week ended March 1, while analysts had predicted inspections of 33 million to 38 million. The previous week, 34.199 million bushels were inspected, the USDA said.

 

For the current market year to date, 766.955 million bushels have been inspected for export, compared to 620.398 million at this time last year.

 

"We're running into competition with South America now," Roose said, referring to soybean export business.

 

There was some support for prices from position squaring, a CBOT floor trader said.

 

In pit trades, USA Trading bought 1,500 May, and Term Commodities bought 600 May. On the sell side, Man Financial sold 1,000 Nov, while ADM sold 1,000 Nov and 500 May. ABN Amro spread 800 Nov/May, and Tenco spread 600 March/May. Term Commodities spread 500 Nov/May.

 

 

SOY PRODUCTS

 

CBOT soy product futures finished in negative territory on borrowed weakness, analysts said. Losses in soybeans weighed on soymeal and weakness in crude oil futures pressured soyoil, they said.

 

"I think all the markets were down with crude earlier," Roose said.

 

Funds sold an estimated 1,000 soymeal and 1,000 soyoil.

 

In soymeal pit trades, JP Morgan bought 600 May and sold 400 May. Fimat sold 600 May. Shatkin Arbor spread 400 May/December soymeal.

 

In soyoil trades, Prudential bought 900 May, and Citigroup bought 400 May. RJ O'Brien sold 500 May, and Rand Financial sold 400 May.