June 22, 2007

 

CBOT Soy Review on Thursday: Sharply lower on weather, technical selling

 

 

Bearish weather forecasts drove Chicago Board of Trade soybean futures deep into negative territory Thursday, triggering sell stops and technical liquidation along the way as prices slipped before a key moving average, analysts said.

 

July soybeans ended down 20 1/2 cents at US$8.18 1/2 per bushel. August soybeans closed 21 3/4 cents lower at US$8.26, and November soybeans settled 23 3/4 cents lower at US$8.50 3/4.

 

Midday weather forecasts predicted larger rainfall totals for the U.S. eastern Midwest this weekend, a bearish development as the precipitation is expected to ease dryness and give a boost to the developing crop, analysts said. A tropical wave is also set to slide into the U.S. Delta, bringing moisture to growing areas Sunday night to Tuesday, forecasters said.

 

"Yesterday at one time and even as early as early this morning, there were some weather people thinking eastern corn belt parts may miss out" on the rain, said Dale Durchholz, analyst for AgriVisor in Bloomington, Ill. The updated forecasts, however, "just kind of pulled the plug" on that.

 

Although soybeans seem to be "suffering a great deal" in dry Illinois fields and stands look spotty in places, the crop continues to show moderate growth in most areas, according to a report from Emerson Nafziger, extension agronomist at the University of Illinois at Urbana-Champaign. The "crunch time" for soybeans is still several weeks away, so growers don't need to worry about dryness just yet, he said.

 

Continuing high temperatures in Illinois will mean an early start to flowering for the crop, Nafziger said. Producers might see flowers on earlier varieties before July, which can be an advantage if plants get enough rainfall to extend the flowering period and increase the number of flowers that become pods, he said.

 

Commodity funds sold an estimated 8,000 contracts during the day session. Man Financial sold 1,200 November, while RJ O'Brien sold 500 November and FC Stone sold 400 November.

 

November soybeans traded below its 20-day moving average for the first time since May 11, bringing more technical selling to the table, traders said. The contract set a weekly low of US$8.47 1/2.

 

"When beans dropped to a new low of the week, you hit a number of stops from the long fund division," Durchholz said.

 

In other news, the U.S. Department of Agriculture said 2006-07 weekly soybean export sales were 359,300 metric tonnes, above trade estimates. The sales also were 62% above the previous week and 69% above the prior four-week average, according to the USDA.

 

Major buyers were Mexico, which took 107,700 tonnes, Japan, which bought 77,500 tonnes, and China, which took 50,600 tonnes, according to the UDSA. Sales of 31,500 tonnes for delivery in 2007-08 were for Mexico, which bought 31,000 tonnes, and Japan, which bought 500 tonnes.

 

Looking forward, soybeans should stay focused on the weather in the short term, traders said. In the longer term, a loss of U.S. soybean acres to corn remains supportive, Durchholz said.

 

"At these kinds of price levels that we're at and with the kinds of rallies we've had, you can have a fairly significant setback and still have that be a force in the market," Durchholz said about the supportive acreage loss.

 

 

SOY PRODUCTS  

 

Heavy fund selling and spillover weakness from soybeans dragged CBOT soy products lower, traders said. Commodity funds sold an estimated 4,000 soyoil and 3,500 soymeal.

 

In soyoil pit trades, UBS sold 1,000 August, while Goldenberg Hehmeyer bought 800 July. In soymeal pit trades, Man Financial sold 600 December, and JP Morgan bought 800 July.

 

Weekly soymeal sales were a net 57,800 tonnes, at the low end of trade estimates of 50,000-125,000 tonnes and 42% below the prior four-week average. Soyoil sales were 20,600 tonnes, above trade estimates of nothing to 10,000 tonnes.