May 20, 2006

 

CBOT Soy Review on Friday: Futures succumb to technical sales

 

 

Chicago Board of Trade soybean futures sank to three-week lows Friday, succumbing to technically motivated speculative sales amid the absence of supportive features to underpin prices.

 

July soybeans ended 11 cents lower at US$5.87, July soymeal settled US$1.90 lower at US$173.40 a short tonne, while July soyoil ended 54 points lower at 25.03 cents a pound.

 

The market lost its crutches with corn, wheat and outside markets stumbling, and with active contracts penetrating major moving average support, futures were left on shaky legs, said John Kleist of Kleist Agricultural Consulting.

 

The drop in outside markets put the focus back on bearish fundamentals, and with technical strength violated, higher price levels weren't justified, the analyst added.

 

The theme was consistent from the outset, with favorable weather conditions for planting and emergence next week, burdensome supplies and a weak commodity profile casting a defensive cloud over the market for the entire day.

 

Otherwise, traders say the declines were purely technical with large stop orders triggered once the active July contracts penetrated support at its 50-day moving average - US$5.92 1/4 and then at US$5.91 - the bottom of a chart gap left from April 27.

 

Meanwhile, the DTN Meteorlogix weather outlook said precipitation maps show light rainfall in the northern and eastern Midwest over the next few days. Conditions for planting and development are good in the Western Corn Belt, with scattered rain up to half an inch. In the eastern Midwest, rain will also be scattered, with totals up to a quarter inch. Temperatures in the east will be below normal, with highs in the 60s and 70s, and down into the 50s around the Great Lakes, but by the middle of next week, temperatures should be up above normal, so plant development should not be adversely affected, Meteorlogix said.

 

In pit trades, ABN Amro, Goldenberg Hehmeyer and Rand Financial each bought 1,000 July, Citigroup bought 800 July.

 

On the sell side, ADM Investor Services and ABN Amro each sold 1,500 July, Rand Financial sold 3,000 July, Tenco sold 2,000 July, JP Morgan sold 1,000 November, Calyon Financial, Man Financial, and RJ O'Brien each sold 1,000 July. Commodity fund selling was estimated at 12,000 contracts. South American soybean futures ended lower, with the July future settling 12 1/2 cents lower at US$5.88 1/2.

 

 

SOY PRODUCTS

 

Soy product futures fell in unison with soybeans, pressured by speculative sales amid the bearish influence of tumbling outside inflationary markets. Soyoil futures led the setback, with the consolidation of long positions following the recent build up length in the market set the stage for the losses. Prices fell to nearly two-week lows as technical pressure and the crude oils stumble took some of the energy related bullish enthusiasm from prices, traders said.

 

Soymeal was drawn down with the rest of the complex, but managed to gain some product share from heavier losses in soyoil, traders said.

 

July oil share ended at 42.17%, and the July crush ended at 69 cents.

 

In soymeal trades, JP Moran bought 1,000 July, Iowa Grain sold 1,400 July, Man Financial sold 900 July, Refco sold 600 July, JP Morgan and O'Connor each sold 400 July. Commodity fund selling was estimated at 4,000 lots.

 

In soyoil trades, Bunge Chicago bought 500 July, Citigroup bought 400 July, and Goldenberg Hehmeyer bought 900 July. On the sell side, active selling was witness across various commission houses, with JP Morgan, Man Financial ABN Amro and Prudential Financial featured sellers.