June 9, 2006

 

CBOT Soy Review on Thursday: Backpedals on technical sales; outside markets

 

 

Chicago Board of Trade soybean futures ended lower across the board Thursday, backpedaling on technical selling, spillover weakness from outside markets and favorable crop conditions in the Midwest.

 

July soybeans ended 9 1/4 cents lower at US$5.87 3/4, July soymeal settled US$2.00 lower at US$180.10 a short tonne, and July soyoil ended 30 points lower at 24.65 cent a pound.

 

The defensive theme was consistent throughout the day, with the declines in world commodity valuations and favorable weather conditions sending prices retreating through underlying support levels, analysts said.

 

The market satisfied a near-term technical objective of completing the retracment of last Friday's sharp rally, with the ability of the July future to puncture support at its 50-day moving average opening the flood gates of selling before the momentum was exhausted below Friday's low, traders added.

 

The absence of fresh news kept prices pinned in negative territory, with prices hovering in a range as traders positioned themselves ahead of Friday's supply and demand reports.

 

U.S. Department of Agriculture is scheduled to release its monthly supply and demand revisions Friday 7:30 a.m. CDT (1230 GMT). The average of analysts' estimates peg U.S. 2005-06 U.S. soybean ending stocks at 568 million bushels, up 3 million from May's forecast. The estimates ranged between 550 million and 580 million bushels. The average of analysts estimates for 2006-07 ending stocks were 658 million bushels from a range of 621 million to 725 million bushels.

 

Meanwhile, the DTN Meteorlogix forecast calls for total precipitation in the western Midwest of up to one inch by the end of the day Saturday. Coverage will be widespread, with up to 70 percent of the region benefiting from this moisture. The rainfall will be very welcome, following mostly dry weather in the past week.

 

Eastern Midwest areas will receive less rainfall - up to three-quarters of an inch. However, this sector of the Midwest has had some heavy rainfall recently, notably in Indiana, Michigan and Ohio; thus, drier weather will not pose a significant threat to crop conditions. Next week continues favorable weather for the Midwest. Temperatures will be normal to above normal in the western Midwest and normal to below normal in the east. Western Midwest crops have another round of normal to above-normal rainfall in the outlook. Eastern Midwest crops will have normal to below-normal rainfall, but mild temperatures and plentiful soil moisture will reduce any potential stress from this pattern, Meteorlogix said.

 

In pit trades, Man Financial, Term Commodities and JP Morgan were buyers on the day. Goldenberg Hehmeyer and JP Morgan each sold 1,000 July, Citigroup sold 1,000 November, ADM Investor Services sold 500 November, and RJ O'Brien and Refco each sold 300 July. Commodity fund selling was estimated at 5,000 lots. South American soybean futures ended higher, with the July future settling 2 3/4 cents higher at US$6.15 1/2.

 

 

SOY PRODUCTS

 

Soy product futures ended lower across the board, pressured by technical selling and the bearish influence of weakness in outside markets. Soyoil futures stumbled lower, with speculative selling featured as prices fell through support at the May low and the July contract's 50-day moving average. The market continues to trade in step with energy markets, following crude oil futures to the downside, traders said.

 

Soymeal futures fell in step with the rest of the complex, but the unwinding of soyoil/soymeal spreads managed to limit downside pressure. However, overnight reports of a new outbreak of bird flu in China applied aided the defensive theme, traders said.

 

July oil share ended at 40.63%, and the July crush ended at 79 1/2 cents.

 

In soymeal trades, JP Morgan bought 800 December, Bunge Chicago sold 300 July and JP Morgan sold 400 December.

 

In soyoil trades, Bunge Chicago bought 2,000 July, Fimat bought 800 July, ADM Investor Services sold 300 December, Rand Financial and UBS Securities each sold 700 July. Fund selling was estimated at 3,500 lots. Produce spread 3,200 July/December and Iowa Grain spread 2,000 December/July.