June 30, 2009

Deliveries against the Chicago Board of Trade July soy and soymeal contracts on first notice day Tuesday (June 30) are expected to be nonexistent, while soyoil notices have the potential to be large, based on ample US supplies, analysts said.

 

Analysts expect no deliveries against CBOT July soy and soymeal contracts on first notice day. Soyoil delivery notices are expected in a range of 1,500 to 3,000 contracts. As of 5 p.m. EDT (2100 GMT) Friday, zero soy contracts, zero soymeal contracts and 13,647 soyoil contracts were registered for delivery at CBOT-approved warehouses.

 

Tight old-crop inventories, with solid export and domestic crusher demand, are expected to keep supplies in firm hands on first notice day, a cash-connected CBOT floor broker said.

 

"I would be surprised if any deliveries were posted against July beans or meal," said Don Roose, president US Commodities in West Des Moines, Iowa.

 

"Supplies are razor-tight, and end users would love to be delivered supplies at board prices and at a deliverable location," Roose added.

 

Processors are not only having difficulty locating soy for crushing because of the tight stocks from last year's crop, but they also are finding quality oilseeds to produce high-protein soymeal for poultry and livestock feed is even harder to obtain.

 

The July/August spread settled at a 93-cent inverse Monday, and the July/November spread settled at a US$2.31 1/2-cent inverse.

 

The spreads are similar to 2004, when the July/November spread accelerated to above US$3.00 a bushel after first notice day, and traders are moving the spread early amid the limited risk of being delivered on a long July position, Roose said.

 

Soymeal is dealing with the same situation as soy, and that should limit deliveries, analysts said.

 

The inability of processors to produce high-protein soymeal promises to keep bull spreads thriving as market longs have little risk of being delivered upon when CBOT July soymeal nears expiration.

 

"Finding quality soy is an issue, with farmers holding supplies tight, meaning anyone holding meal receipts is not willing to expose them to physical delivery," said Joe Victor, analyst with Allendale Inc. in McHenry, Ill.

 

Much of the remaining soy supplies don't grade well enough for high-protein meal. High-protein meal has 48 percent protein content; to deliver against the CBOT soymeal contract, meal must contain at least 47.5 percent protein. Large available soyoil inventories, slow domestic use for food and the biodiesel industry, and holders of receipts are expected to put out a large quantity, traders said.

 

Nevertheless, soyoil deliveries remain the wild card, traders and analysts said. With 13,647 contracts registered for delivery and supplies in good hands, it is tough to figure just how many receipts could be put out, analysts said. The majority of soyoil stocks are in eastern Iowa, with 3,996 lots registered in Ackley, Iowa, and in Volga, S.D., with 3,088 lots registered.