March 26, 2010

 

CBOT Soy Review on Thursday: End down on technical weakness, firm dollar

 

 

Chicago Board of Trade soy futures tumbled to 1-week lows Thursday, pressured by technical weakness, a firm U.S. dollar and a lack of fresh fundamental support.

 

Nearby CBOT May soy, which is also the most-active contract settled 17 1/2 cents, or 1.82% lower, at US$9.42 1/2 per bushel.

 

The absence of fresh fundamental news left futures without a spark to attract buyers, analysts said. A record South American harvest, slowing export demand and outlooks for a jump in 2010 U.S. soy plantings were fundamental catalysts to keep buyers on the sidelines.

 

The bearish influence of a rising U.S. dollar provided psychological pressure to extend the losses. A firm dollar is often seen as bearish, attracting speculative selling because it makes U.S. grains and oilseeds less attractive to foreign buyers and reduces investors' appetite for risk.

 

Declines accelerated near the close, as spillover weakness from neighboring corn and wheat futures, and the inability of soy to sustain early gains in the face of ample world supplies, launched a wave of fresh selling pressure.

 

The covering of long positions as well as fresh selling in anticipation of a bearish jump in 2010 U.S. soy acres attracted additional selling to firmly plant prices in negative territory, said Chad Henderson, analyst with Prime Ag Consultants.

 

Technically oriented selling was the final piece to the day's bearish puzzle, with downside momentum picking up as prices dipped below the week's low and key moving average chart support levels, traders said.

 

Speculative funds were estimated sellers of 8,000 lots in soy, 2,000 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 settled lower, backpedaling in unison with soy. Soymeal futures tumbled nearly 2%, succumbing to the unwinding of meal/oil spreads and bearishness from a larger-than-expected build up of end of February stocks reported by the Census Bureau. Technical selling was featured as well, with declines accelerating after prices dipped below key chart support levels.

 

Soyoil futures dropped to 1-month lows on technical weakness and spillover from crude oil futures. However, the market did garner some value in the crush spread amid weakness in soymeal and a smaller-than-expected build up of Census Bureau February stocks.

 

May soymeal ended US$5.00 or 1.85% lower at US$265.90 per short tonne, while May soyoil settled 38 points or 0.97% lower at 38.70.

 

May oil share was 42.19% while the May soy crush margin ended at 68 1/4 cents.