April 8, 2009

 

CBOT Soy Review on Tuesday: Soybeans succumb to speculative selling

 

 

Speculative selling pressure and losses in equity and other grain markets pressured Chicago Board of Trade soybeans Tuesday, pushing the market into the red.

 

Most-active and nearby May soybeans fell 4 1/2 cents to US$9.89 1/2 a bushel. New-crop November fell 3 1/2 cents US$9.08 1/2.

 

May soymeal fell 20 cents to US$306.20 a short tonne and May soyoil fell 15 points to 34.84 cents a pound.

 

Weakness in the U.S. stock market, dollar strength and late, fresh selling in neighboring grain pits were too much for soybean futures to withstand, succumbing to profit-taking after soybeans traded firmer earlier in the session.

 

"It's really a disappointing performance for the bulls," said Vic Lespinasse, analyst at grainanalyst.com. "We had some strength despite pressure from the outside market - there was fund buying, talk that China might buy beans out of the Gulf (of Mexico) and when we got about US$10 in the May, that was psychologically and technically important."

 

The market's strength was fleeting as the funds who were buyers earlier in the session turned sellers and losses in wheat accelerated. "Corn also broke under US$4 and the combination of fund selling and unrelenting pressure from outside markets was too much," Lespinasse said.

 

Funds were said to have sold about 4,000 contracts.

 

The break was more pronounced in the nearby contracts versus deferreds, allowing the old-crop/new-crop spread to tighten.

 

"Number one, the spread had a substantial move since the (quarterly grain) stocks report," said Don Roose, president, U.S. Commodities. "Now as we get closer to another report, we're seeing some profit taking come in."

 

Roose said resistance for the old-crop/new-crop spread runs between 80 cents and US$1 and trading Tuesday probed into this resistance area. The May-November spread traded at 81 cents and the July-November spread traded at 79.5 cents.

 

"The real issue is that all these markets are fragile. We don't have enough fundamental news to help them break away" from the larger economic picture, he said.

 

 

Soy Products

 

Soymeal and soyoil fell late in sympathy with soybeans, with soyoil probing the downside a little more. Like soybeans, meal and oil spent time in the black for much of the session, holding up even in the face of weakness in the rest of the markets.

 

Yet it was the break in soybeans that took the products down to the south side of steady late in the day. Soyoil's break was slightly influenced by the drop in crude oil prices below US$50 a barrel, but some analysts suggested the break in the products was minor.

 

Mike Zuzolo, senior analyst for Risk Management Commodities, suggested the limited losses in soy products echo the fundamentals. "I think it goes back to the tight supplies and the fact that the vegetable oil and the palm oil and hitting multi-month highs over in Asia," he said. "I think that's catching the attention of the bean oil traders here in Chicago."