June 13, 2007

 

CBOT Soy Review on Tuesday: Slumps on consolidation, rain in forecast 

 

 

Chicago Board of Trade soybean futures stumbled Tuesday in a consolidation after strong gains Monday and under pressure from forecasts for rain in the eastern U.S. corn belt, analysts said.

 

July soybeans closed down 3 1/2 cents at US$8.26 1/2, and November soybeans finished 3 1/4 cents lower at US$8.60 1/4. July soymeal slipped US$1.00 to US$229.20 per short tonne, and July soyoil fell 15 points to 35.27 cents per pound.

 

The soybean market consolidated Monday's spike to new contract highs with speculative-led selling weighing on prices, analysts said. There was an absence of fresh supportive news to feed the bulls, they added.

 

Weather forecasts for rain in the eastern corn belt also drove prices to the downside, analysts noted.

 

"The European weather model of forecasting has been the model for the last 8 weeks that keeps telling us how dry the eastern grain belt is going to be," said Tim Hannagan, analyst at Alaron Trading in Chicago. "Overnight last night and this afternoon, all the radar runs of European model are telling everybody out there that next Monday and next Tuesday, the driest areas of the eastern grain belt could see 1-3 inches of rain."

 

Other weather outlooks confirmed the chance that rain early next week would relieve some dryness in the eastern Midwest. John Dee, president of Global Weather Monitoring, predicted a 1/4 to 1 inch of precipitation.

 

"Almost the entire Midwest seems to be under the gun for that type of rainfall," Dee said. "It looks like perhaps the northern Midwest would be favored for the heaviest rains, but that doesn't mean Illinois, Indiana and Ohio would be excluded from inch type rains."

 

Soybeans had become overbought due to dryness in the early part of the growing season, and market participants lightened up positions in the face of the forecasts, a floor trader said. Still, market participants "know that when you're looking six, seven days out, things can change," Hannagan noted.

 

Traders will continue to watch the weather in the near term for direction, analysts said.

 

"Tomorrow we'll be down more if those forecasts are even stronger," Hannagan said. "It just looks like too much rain next week."

 

The U.S. Department of Agriculture's weekly crop progress report also revealed U.S. soybean crop ratings did decline as much as many analysts had anticipated, a development that attracted early selling, floor traders added.

 

The USDA rated 70% of the U.S. soybean crop in good-to-excellent condition, down 1 percentage point from the previous week. Analysts had expected conditions to fall in a range of down 1 to 3 percentage points.

 

In the major soybean states, Illinois soybeans were rated 67% good-to-excellent, down one percentage point from last week, and Iowa was up 2 percentage points at 78%. Indiana saw a drop of 8 percentage points in good-to-excellent ratings to 56% from 64%, and Ohio soybeans fell 3 percentage points to 64% good-to-excellent.

 

Eighty-four percent of the crop had emerged compared to the five-year average of 75%. Ninety-four percent of the crop was reported planted compared to the five-year average of 89%.

 

Commodity funds sold an estimated 2,500 contracts. In pit trades, ADM bought 500 July. JP Morgan and Tenco each sold 400 July, while Rand Financial sold 400 November.

  

 

SOY PRODUCTS  

 

CBOT soy product futures felt spillover weakness from soybeans, floor traders and analysts said. Soymeal futures were also in an overbought condition and staged a modest correction from multi-month highs, they added.

 

Early in the trading session, soyoil futures managed to recover from opening declines, with borrowed strength from Malaysian palm oil futures and spread trading seen as underpinning features, analysts said. Prices then faltered a bit under pressure from declines in soybeans and crude oil futures, they said.

 

Commodity funds bought an estimated 1,000 soyoil and were called even in soymeal. In soyoil pit trades, Calyon bought 1,200 July. JP Morgan sold 400 July, and Fimat sold 300 July. Soymeal pit trades were scattered.