April 19, 2007

 

CBOT Soy Review on Wednesday: Down as inter-commodity spreads unwind

 

 

Chicago Board of Trade soybean futures sagged lower Wednesday amid heavy fund selling, technical pressure and the unwinding of inter-commodity spreads, traders and analysts said.

 

May soybeans closed down 8 1/2 cents at US$7.15 1/2 per bushel, July soybeans finished down 9 cents at US$7.32 1/4 and November soybeans closed down 11 cents at US$7.59 1/2. May soymeal ended down US$0.90 at US$196.90 per short tonne, and May soyoil closed down 80 points at 31.07 cents per pound.

 

Market participants unwound a good number of short corn, long soybean spreads toward the end of the session, a floor trader said.

 

Follow-through technical weakness from Tuesday also kept futures on the defensive, traders added. Several months remained below their 100-day moving averages, contributing to the lack of buying interest, they said.

 

"Taking the 100-day moving average out yesterday was just an ugly situation," said Jerry Gidel, analyst with North America Risk Management Services.

 

Funds sold an estimated 5,000 contracts. In pit trades, UBS sold 1,400 July, while Man Financial sold 400 May and 400 July. JP Morgan sold 400 May. Tenco bought 1,000 July.

 

If the sell-off continues in beans, there is psychological support for the May contract at US$7, Gidel said. Beyond that, the 200-day moving average for May soybeans is at US$6.78.

 

The fundamental outlook for beans also looks bleak amid bearish old-crop supplies, traders said. There are also negative ideas that a large soybean crop from South America will slow demand for U.S. soybeans, they added.

 

Delays in U.S. corn planting is further bearish for soybeans, as it indicates that producers may plant more soybeans instead, Gidel said. Soggy weather has prevented farmers from getting into their fields to plant corn, and forecasts for more precipitation next week are seen as further being negative for soybeans, analysts said.

 

In the seven- to 14-day period, warm conditions will prevail across the corn belt, and the instability that results could produce thunderstorms and rain for the region, T-storm Weather said in a midday forecast. Muggy winds will develop and continue the warm conditions in the corn belt early next week, T-storm said, but warned "this pattern is unstable."

 

On Monday, thunderstorms could develop from the Plains into the western corn belt, T-storm said. Those storms could then shift into the eastern corn belt Tuesday through Thursday, with rainfall totals possibly exceeding 1 inch across the corn belt, the private weather firm said.

 

The wet forecast "makes the corn a little more exciting and it also means there could be more beans planted," Gidel said. "We're back to that game again."

 

Once corn farmers are able to get into the fields, it could offer some fundamental support for soybeans, an analyst added.

 

 

SOY PRODUCTS

 

CBOT soy products closed lower with soybeans.

 

Fund selling of an estimated 8,000 soyoil contracts weighed on prices, traders said. Large soyoil stocks reported in the recent NOPA report also remained bearish for the market, said Jerry Gidel, analyst for North America Risk Management Services.

 

In soyoil trades, Fimat sold 1,500 July and 1,000 May. Calyon sold 1,500 May, and Man Financial sold 800 July. RJ O'Brien sold 700 May. Commercial buying was estimated at 4,000 contracts. Bunge also bought 800 May, while Fimat bought 500 May and 500 July. Shatkin-Arbor spread 2,000 July/May. May soymeal ended down US$0.90 at US$196.90 per short tonne, and May soyoil closed down 80 points at 31.07 cents per pound.

 

Funds were called even in soymeal. Soymeal felt some support from light meal/oil spreading but could not maintain its gains amid the losses in oil and soybeans, traders said. In soymeal trades, UBS bought 300 May. JP Morgan spread 700 May/July.