March 12, 2010

 

CBOT Soy Review on Thursday: Prices tumble on bearish fundamental influences

 

 

A plethora of bearish influences combined to send Chicago Board of Trade soy futures tumbling to one-month lows Thursday.

 

A disappointing weekly export sales report, reflecting China canceling previously bought U.S. supplies, set prices on a lower path. The net reduction in export sales was seen as a signal of demand shifting from the U.S. to South American origins.

 

CBOT March soy ended 26 1/2 cents or 2.78% lower at US$9.25 1/2 per bushel, and May soy settled 27 1/2 cents or 2.87% lower at US$9.30 1/2.

 

Traders eagerly covered positions bought in Wednesday's rally following a supportive supply and demand report estimating tighter marketing year ending inventories.

 

The combination of net export sales reductions and fears that China's efforts to curb inflation through credit tightening will slow the nation's buying of soy provided additional pressure for prices, said Bill Nelson, analyst with Doane Advisory Service.

 

China is the world leader in soy imports.

 

The advancement of a record South American soy harvest and the competition the new supplies will bring for U.S. supplies was another bearish feature that traders faced in Thursday's session. Meanwhile, a lack of fresh supportive news left futures without a crutch to lean on, with modest pressure from outside macro markets generating psychological pressure.

 

Technical selling helped accelerate the market's slide, with pre-placed sell orders triggered once futures slipped below key chart support.

 

However, traders said despite the losses the market remains within a wide near-term trading range. Concerns about two-week delays in loading out supplies at Brazilian ports and a tight U.S. balance sheet provide underlying support.

 

Speculative funds were estimated sellers of 7,000 lots in soy, 2,000 lots in soymeal and 3,000 lots in soyoil. Fund activity is a measure of investment money flow in the market.

 

 

Soy Products

 

Soy product futures tumbled in unison with the drop in soy futures. The bearish impact of weekly export sales and fears of further demand reductions promoted bearish sentiment in the markets, analysts said. Bullish outlooks for increased world vegoil consumption amid rising biofuel demand and growing world populations allowed soyoil to gain versus soymeal on spreads, traders said. Soymeal dropped to their lowest levels in a year on weakening demand.

 

March soymeal settled US$9.10 or 3.52% lower at US$249.60, and the May contract ended US$6.60 or 2.55% lower at US$252.60 per short tonne. March soyoil dropped 87 points or 2.14% to 39.82 cents per pound, while the May contract settled 91 points or 2.22% lower at 40.11.

 

May oil share was 44.25% while the May soy crush ended at 66 1/2 cents.