June 10, 2006

 

CBOT Soy Review on Friday: Down on fundamental, spillover pressure

 

 

Chicago Board of Trade soybean futures ended a choppy trading session modestly lower Friday, scaling back initial advances on spillover pressure from grain futures and bearish underlying fundamentals.

 

July soybeans ended 2 cents lower at US$5.85 3/4, July soymeal settled US$3.50 lower at US$176.60 a short tonne, and July soyoil ended 21 points higher at 24.86 cent a pound.

 

The absence of supportive features to underpin prices left futures on the defensive, with a reversal of gains in corn and wheat, favorable weather conditions and record projected inventories combining to weigh on prices, analysts said.

 

Supportive outside market influences provided strength to produce early advances, but without a fundamental spark to sustain upside moves, futures easily sank to a one week low.

 

The market settled into a choppy trading range for the remainder of the day, after successfully drifting below last Friday's large trading range, analysts said. The U.S. Department of Agriculture's monthly supply and demand revision came in as expected, failing to provide any fresh features for prices. However, despite the non eventful report, futures are still faced with record old- and new-crop projected inventories, said a CBOT broker.

 

USDA estimated 2006-07 ending stocks at a record 655 million bushels. This compares to the average trade estimate of 658 million bushels for 2006-07 soybeans. For old-crop, USDA said its estimate of 2005-06 ending stocks was 570 million bushels versus an average trade estimate of 568 million bushels. In world numbers, USDA 2006-07 Brazilian and Argentine soy production would increase to a combined 97.3 million metric tonnes.

 

Meanwhile, the DTN Meteorlogix forecast calls for scattered thunderstorms through Saturday, followed by drier conditions the first part of next week. Good rainfall chances cover an area from central Iowa through north-central Illinois. In this sector of the Midwest, rainfall looks to total one inch or greater by Sunday. Next week continues to offer the prospect for periodic showers across the central U.S. As with earlier episodes of rainfall, the best chance for significant development will be for Minnesota and Iowa on east through the Great Lakes and Ohio Valley.

 

In pit trades, ADM Investor Services bought 400 July, Fimat and JP Morgan each bought 500 July, and Man Financial and UBS securities bought 300 July. Man Financial sold 800 July, JP Morgan and Rand Financial each sold 500 July, and Citigroup sold 300 July. South American soybean futures ended higher, with the July future settling 1/2-cent higher at US$6.12 1/2.

 

 

SOY PRODUCTS

 

Soy product futures ended mixed, with soyoil futures gaining product share at the expense of soymeal. Soyoil futures were the strongest link in the soy complex, managing to rebound from prior losses on borrowed strength from crude oil futures.

 

Soymeal futures stumbled lower with soybeans, under pressure from soyoil/soymeal spreading.

 

July oil share ended at 41.31%, and the July crush ended at 76 1/4 cents.

 

In soymeal trades, buyers were scattered among various trading firms, with Citigroup a buyer of 500 July. Citigroup sold 300 July, Calyon Financial and Fimat each sold 200 July.

 

In soyoil trades, ADM Investor Services and JP Morgan each bought 400 July, Bunge Chicago bought 300 July, and Iowa Grain bought 300 December. Tenco sold 400 December, and Citigroup sold 400 July, with scattered selling from various commission houses.