June 20, 2007

 

CBOT Soy Review on Tuesday: Down sharply on improved weather outlooks

 

 

Chicago Board of Trade soybean futures ended sharply lower Tuesday, backpedaling on speculative selling amid the extraction of risk premium following improved moisture chances for the eastern Midwest.

 

July soybeans settled 26 1/4 cents lower at US$8.29, and November soybeans finished 25 cents lower at US$8.64. July soymeal settled US$8.10 lower at US$229.70 per short tonne. July soyoil ended 77 points lower at 35.32 cents a pound.

 

Rains in parched areas of the eastern corn belt overnight set the stage for the declines, with midday weather forecasts increasing the potential for shower activity in the region by the weekend encouraging speculative buyers to trim market length, analysts said.

 

Technically inspired selling was featured as well, with declines accelerating once prices dipped under Monday's lows, a CBOT trader said. Spillover weakness from a limit- down slide in neighboring corn futures added to the losses, as speculative fund longs ran for cover throughout the CBOT ag complex, he added.

 

Weather served as the catalyst for the slide, with overbought market conditions generating an overdue price correction, traders said. The forecast rains are seen greatly benefiting soybean crops that have suffered from a lack of rain in May and June in the eastern Midwest, analysts said.

 

Nevertheless, traders said the overall trend remains higher as long-range bullish outlooks will continue to underpin prices as the uncertainty of a long growing season will provide volatility through the summer months.

 

Based off the latest run of the U.S. computer weather model, there is a better chance of scattered showers and thunderstorms moving into the eastern Midwest from Friday into Saturday, said Joel Burgio, meteorologist with DTN Meteorlogix Weather Services. 
 

The system brings the potential for shower activity producing from 1/4 inch to an inch of rains across the driest areas of Illinois, Indiana and Ohio, Burgio said. The only problem is there is not another rain system on maps for the next 10 days, so areas that miss this rain will not have anything that looks promising for at least a week, he added.

 

Beyond that rain system, hot weather returns for a few days, but cooler temperatures are on tap in longer-range forecasts, Burgio added.

 

In pit trades, speculative fund selling was estimated at 8,000 lots, with ADM Investor Services, RJ O'Brien, JP Morgan and Tenco featured sellers.

 

 

SOY PRODUCTS

  

Soy product futures tumbled in unison with soybeans, as speculative-led selling pressure sent prices backpedaling. The absence of fresh supportive news provided little strength to underpin prices, with spillover weakness from soybeans firmly planting soymeal futures in negative territory.

 

Soyoil futures retreated with the rest of the complex, with declines in soybeans and overnight declines in palm oil futures attracting selling pressure. "It was broad-based speculative fund selling across the CBOT ag complex, and soyoil was not exempt from the pressure," a CBOT floor analyst said.

 

July oil share ended at 43.47% and the July crush ended at 64 3/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with speculative fund selling estimated near 3,000 lots.

 

In soyoil trades, speculative funds were net sellers of between 2,000 and 3,000 contracts. Bunge Chicago bought 1,100 July, with JP Morgan, Penson GHCO and UBS Securities featured sellers.