March 18, 2008

 

CBOT Soy Review on Monday: Tumbles lower on economic worries

 

 

Chicago Board of Trade soybean futures tumbled lower Monday, dropping 50 cents to their lower daily limits amid speculative long liquidation associated with U.S. economic worries.

 

May soybeans settled 50 cents lower at US$13.02 3/4, July soybeans finished 50 cents lower at US$13.18 3/4 and November soybeans ended 50 cents lower at US$12.29. May soymeal settled US$20.00 lower at US$323.80 per short tonne. May soyoil finished 200 points lower at 58.56 cents per pound.

 

"It's a crisis of liquidity in the market, as a lack of inter-bank lending has participants reassessing the risk of holding big market positions with prices at historic highs," said Dan Basse, president AgResource Company in Chicago.

 

The economic turmoil in the markets produced broad based selling in most commodities, with a flight to liquidity a featured attraction, as participants rushed to sell winning positions in an effort to offset losses in other markets, analysts added.

 

A sharp drop in crude oil futures weighed on prices as well, with traders viewing the Federal Reserve's cut in the discount rate at an emergency weekend meeting and news of JPMorgan Chase & Co. (JPM) bargain-basement buyout of Bear Stearns Cos. (BSC) reinforced economic jitters and sent buyers running for cover, analysts added.

 

The theme was consistent, with market fundamentals taking a back seat to the economy, with weakness in world soy and vegoils markets aiding the lower theme as well, traders said.

 

The lower theme is seen carrying forward into the overnight session, analysts said. The synthetic price of May and July futures in the options market, suggest further liquidation is on tap unless economic uncertainties are resolved quickly, a CBOT floor broker said.

 

The May future was trading between US$12.42 and US$12.52 and the July future was trading between US$12.53 and US$12.65 synthetically in the options pit, traders said.

 

In pit trades, speculative fund selling was estimated at 2,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures spiraled lower, tumbling to their respective lower daily trading limits. Soyoil futures were the downside leader of the complex once again, tumbling on speculative long liquidation, as traders trimmed length in an effort to reduce risk in the market, analysts said. Weakness in world vegoil markets overnight and heavy losses in crude oil futures over the course of the day supplanted futures at their limit down 200 point trading limits from the outset of the session, analysts added.

 

Soymeal futures fell under the weight of speculative liquidation as well, analysts said.

 

The May soymeal future was trading between US$316.00 and US$317.00 per short tonne and the May soyoil future was trading between US$56.50 and US$57.00 synthetically in the options pit, traders said.

 

May oil share ended at 47.49% and the May crush ended at 53 3/4 cents.

 

In soymeal trades, speculative fund selling was estimated at 2,000 lots.

 

In soyoil trades, speculative fund selling was estimated at 2,000 lots.