June 4, 2008

 

CBOT Soy Review on Tuesday: Falls on weak crude oil, some CFTC fears

 

 

Chicago Board of Trade soybean futures closed lower Tuesday on pressure from weak outside markets and jitters about new government regulations for agriculture markets.

 

July soybeans settled 6 cents lower at US$13.59 1/2 and November soybeans ended 4 3/4 cents lower at US$13.53 3/4. July soymeal settled US$4.00 higher at US$347.00 per short tonne. July soyoil finished 66 points lower at 61.04 cents per pound.

 

A sharp drop in crude oil futures dragged down the soy complex and the grains in a late sell-off, traders said. Ideas that new initiatives from the Commodity Futures Trading Commission could limit fund buying also attracted speculative selling, some analysts said.

 

The CFTC said index traders and swap dealers need to be monitored more closely in the markets. The agency is developing a proposal to make them divulge more "detailed information," as well as possibly submit to a new type of classification, it said.

 

Reclassifying index traders would be bearish for the markets, an analyst said. The traders may have to adhere to speculative position limits more closely if they lose their ability to be classified as commercials, he said.

 

The CFTC also said it was withdrawing a proposal to hike federal speculative position limits on some agricultural futures. By not increasing position limits for speculators, the CFTC was effectively telling long-only index funds that they were not to be adding any more long positions, said Mike Zuzolo, analyst for Risk Management Commodities.

 

The market's move to the downside was limited by lingering planting delays and slow emergence rates. There also are optimistic demand outlooks amid an extension of the Argentine farmers' strike, analysts said.

 

The U.S. Department of Agriculture, in its weekly crop progress report Monday, said 32% of the U.S. soybean crop was emerged, up from 12% last week but down from the average of 55%. It said 69% of the soybean crop was planted, up from 52% last week but down from the five-year average of 81%.

 

Despite the day's moves, CBOT soybean futures remain confined within a two-month old sideways trading pattern. The market is awaiting new developments that will promote the next trend in the market, a CBOT floor analyst said.

 

 

SOY PRODUCTS

 

CBOT soy product futures ended mixed, with soyoil stumbling in conjunction with the slide in crude oil futures. The biofuel component of soyoil continues to keep movements in crude oil impacting prices, they said.

 

Worries that the CFTC's new initiatives will limit speculative fund influences applied some pressure to soyoil amid fears of reduced fund buying, some analysts said.

 

Soymeal futures ended higher, benefitting from the unwinding of oil/meal spreads and from underlying demand. Traders said fears of fund liquidation didn't impact meal, as meal isn't a basket component of commodities in index funds, a CBOT floor broker said.