May 30, 2007

 

CBOT Soy Review on Tuesday: Lower on weather-based speculative sales

 

 

Chicago Board of Trade soybean futures ended sharply lower Tuesday, backpedaling on speculative selling as improved crop conditions enticed traders into trimming risk premium.

 

July soybeans settled 15 cents lower at US$7.97 1/2, and November soybeans finished 14 3/4 cents lower at US$8.26 3/4. July soymeal settled US$3.80 lower at US$214.40 per short tonne. July soyoil ended 66 points lower at 35.18 cents a pound.

 

The losses were weather-based declines, as conditions in the western belt are turning drier and the eastern Midwest finally received badly needed moisture during the holiday weekend, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

Speculative selling was a featured attraction, with overbought conditions heading into the session attracting profit-taking pressure, analysts said. Spillover pressure from soyoil amid declines in crude oil futures added weakness to keep prices firmly planted in negative territory as well, analysts added.

 

The soybean market had previously been the strength of the CBOT ag complex, but without any fresh supportive news to feed market bulls, futures were overdue for a mild correction, Scoville added. Without a weather concern, the market has the potential for more downside risk to the US$7.75 price level basis the nearby July futures, Scoville said.

 

Nevertheless, analysts said the market will remain volatile, with changing weather patterns during the growing season promising to keep traders on their toes amid smaller 2007 U.S. acreage and expanding global demand.

 

The DTN Meteorlogix forecast calls for showers and thunderstorms to cross the Midwest, leaving moderate to locally heavy rainfall in the western Midwest and lighter rains in the eastern sector this week. This rainfall will follow up some moisture during the Memorial Day weekend, which totaled up to one inch in scattered locations of the region. Crop moisture will remain at favorable levels in the western Midwest. However, the benefit to eastern areas will be much less, due to moisture deficits during May and the lighter rainfall amounts. Many weather stations in the eastern Midwest are well below average on rainfall for May, Meteorlogix reports.

 

The U.S. Department of Agriculture is scheduled to release its weekly crop progress report at 4 p.m. EDT on Tuesday. Analysts anticipate U.S. soybean planting progress advancing in a range 78% to 90% complete.

 

In pit trades, ADM Investor Services bought 1,200 July, Man Financial bought 500 July, and UBS Securities bought 600 November. FCStone, JP Morgan, and Fimat each sold 500 July, Penson GHCO sold 700 July, and Rand Financial sold 300 July and 500 November. Speculative fund selling was estimated between 6,000 and 7,000 lots.

 

 

SOY PRODUCTS

  

Soy product futures ended lower across the board, retreating in step with declines in soybeans. Soyoil futures were the downside leader, with prices setting back on profit-taking pressure, traders said. The inability of the market to attract follow-through buying from overnight price strength in world vegoil markets coupled with weakness in crude oil futures opened the door for traders to book some profits, analysts said.

 

Soymeal futures settled down, stumbling lower on a general bearish theme in the soy complex. Speculative consolidation was a featured attraction, but the market did grab some price support from soyoil/soymeal spreading unwinding, traders added.

 

July oil share ended at 45.07% and the July crush ended at 61 1/4 cents.

 

In soymeal trades, JP Morgan bought 800 July, Penson GHCO sold 900 July and UBS Securities sold 1,000 December. Speculative fund selling was estimated at 3,000 lots.

 

In soyoil trades, ADM Investor Services, Bunge Chicago, JP Morgan, and Fimat each bought 300 July. Rand Financial sold 400 July and 300 December, UBS Securities sold 600 July, and Iowa Grain sold 500 July. Speculative fund selling was estimated between 4,000 and 5,000 lots.