June 20, 2009

 

CBOT Soy Review on Friday: Plunge on acreage estimates, weather outlooks

 

 

Bearish private acreage estimates, improved weather outlooks for Midwest crops and a lack of fresh supportive news sent Chicago Board of Trade soy futures tumbling Friday.

 

CBOT July soys settled 34 3/4 cents lower at US$11.79 and November soys finished 37 1/2 cents weaker at US$10.06.

 

In pit trades, speculative fund selling was estimated at 5,000 lots in soys, and 1,000 lots each in soymeal and soyoil.

 

July soymeal settled US$15.40 lower at US$390.00 per short tonne. July soyoil finished 42 points lower at 36.53 cents per pound.

 

Prices dropped around 3% on the day, with the absence of fresh supportive news opening the door for traders to reduce some risk heading into the weekend.

 

A private acreage estimate projecting a nearly 3 million-acre jump in acres from the government's March forecast, crude oil stumbling and outlooks for warmer and drier Midwest conditions triggered speculative sales to pin prices lower, said Bill Nelson, analyst with Doane Advisory Service in St. Louis.

 

The drier forecast will provide an open window to finalize plantings across the belt next week as well as giving some credence to private forecasts calling for jump in acreage, he said.

 

Technically inspired selling was featured as well, with sell-stop orders activated once active contracts penetrated support at prior lows for the week, traders said.

 

The absence of support from outside markets left futures without any bullish news to keep prices rallying after an over-3-month uptrend.

 

The liquidation of July futures was featured as well, with fears of export demand from China shifting to South America encouraging traders to reduce risk exposure in the nearby contract ahead of the delivery period, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

Informa Economics on Friday projected that 2009 U.S. soy acreage will total 78.869 million acres, according to traders. The private analytical firm's soy acreage would be up from the USDA's March estimate of 76.0 million acres and last year's acreage of 75.7 million.

 

The DTN Meteorlogix weather forecast said upper-air forecast maps Friday indicate some potential for hotter and drier weather for the Midwest later this weekend into Monday. During this period, upper-atmosphere high pressure will be located over the eastern Plains and western Midwest. Model indications point to this upper-level ridge shifting to the west during next week. At that time, the Midwest should see more thunderstorm activity and a little cooler weather returning to the region.

 

 

Soy Products

 

Soy product futures dropped in unison with soys. Soymeal futures tumbled, retreating on the same bearish features of the day as soys, analysts said. Liquidation of July positions was featured, with outlooks for a jump in new-crop soy acres raising thoughts of increase availability of new crop beans for crush.

 

Soyoil futures stumbled, retreating with the rest of the complex, and a slide in crude oil prices applied pressure. The unwinding of meal/oil spreads limited declines, analysts said.

 

July oil share slipped to 31.83%, while the July soy crush ended at 80 3/4 cents.