April 5, 2006

 

CBOT Soy Review on Tuesday: Lower; fundamental, technical pressure

 

 

Chicago Board of Trade soybean futures slid to a new low for the current move Tuesday, continuing its retracement of prior gains on fundamental and technical weakness.

 

May soybeans finished 6 1/4 cents lower at US$5.58 3/4, May soymeal settled US$2.10 lower at US$171.00 a short tonne, while May soyoil ended 20 points lower at 22.44 cent a pound.

 

The weight of bearish fundamentals, with record projected U.S. ending stocks, world supplies and prospective plantings in 2006, kept sellers in control, with bullish traders not presented with anything to sink their teeth into, said Dan Basse, president of AgResource in Chicago.

 

Speculative-led selling served as the catalyst to keep futures on the defensive, with declines accelerating at midday, as the market uncovered pre-placed sell-stop orders once May futures breached support at US$5.59 1/2 - its November low.

 

Technical analysts said nearby May futures satisfied a downside objective, opening the door to a solid leg down in prices in the near term. Looking ahead, traders are targeting the November low near US$5.45 1/2 on continuation charts as the next downside target on technical charts, Basse adds.

 

The theme was consistent from the outset, with the market continuing its ongoing adjustment in prices following Friday's record acreage and quarterly stocks data from the U.S. Department of Agriculture.

 

The market is in a supply-driven bear market, with the South American harvest moving steadily along, and a tepid U.S. export pace making it tough for soybeans to stage any type of rally, said Basse. With that in mind, the current functionality of the market is to adjust prices to curtail farmers from planting a record 76 million acres amid the record U.S. and world supply totals, he added.

 

Otherwise, the market had few features aside from a 39-minute trading halt due to technical problems related to difficulties in the dissemination of price quotes outside of the exchange, said a CBOT spokesman.

 

The DTN Meteorlogix forecast said the Midwest will have a two-day stretch of dry weather followed by a new storm system moving in from the Great Basin and central Rockies during the last half of the week. The western and northern Midwest will receive up to one inch of rain with this storm system, and the eastern Midwest has a similar outlook.

 

In South America, crop weather is mostly favorable during the next two days in Argentina, which will be beneficial for crop dry-down and harvest progress. However, Brazil's central and northern crop areas, from Parana north into Mato Grosso, will have rain and thunderstorms, before a drier weather pattern develops by late week, Meteorlogix said.

 

In pit trades, buying was scattered among various commission houses. On the sell side, FCStonnee sold 300 November, ABN Amro sold 1,000 May, Fimat sold 1,100 May, and JP Morgan sold 300 May and 300 July.

 

Commodity fund selling was estimated near 3,000 contracts. South American soybean futures ended lower. The May future finished 4 cents lower at US$5.82.

 

 

SOY PRODUCTS

 

Soy product futures stumbled lower Tuesday, continuing its price erosion in unison the bearish fundamental prospects of soybeans, analysts said. Soymeal futures fell to a new move low, with the active May futures falling to a nearly 14-month low on sympathetic selling from soybeans and technical weakness.

 

Soyoil futures fell to nearly two-month lows continuing its descent from last week's highs on borrowed weakness from soybeans carryover technical selling from Monday's settlement below meaningful technical points at its 50-day, 100-day and 200-day moving averages, analysts said. Meanwhile, underlying commercial buying limited downside risks, traders added.

 

May oil share ended at 39.62%, and the May crush was at 64 1/4 cents.

 

In soymeal trades, Bunge Chicago bought 400 May and sold 300 May, JP Morgan sold 300 May and 700 July. Commodity funds were net sellers on the day.

 

In soyoil trades, ADM Investor Services and Bunge Chicago each bought 400 May, Term Commodities bought 300 May, Iowa Grain bought 500 May. Calyon Financial sold 700 May, Fimat sold 500 May, Man Financial sold 400 May, JP Morgan and Iowa Grain each sold 300 May. Commercial firms were estimated buyers of 1,500 lost and commodity funds were estimated sellers of 1,800 lots.