July 6, 2006

 

CBOT Soy Review on Wednesday: Lower; consolidates prior gains

 

 

Chicago Board of Trade soybean futures ended on the defensive Wednesday, falling on speculative sales, as the market consolidates previous price gains.

 

July soybeans ended 7 cents lower at US$5.94 1/2, November soybeans finished 8 1/4 cents lower at US$6.21, December soymeal settled US$4.00 lower at US$178.70 a short tonne, and December soyoil ended 11 points higher at 27.38 cent a pound.

 

The market continues to trade violently sideways, as futures fail to sustain any prolonged upside or downside momentum, with traders looking at the market on a day to day basis, unwilling to take a long-term stance, said John Kleist of Kleist Ag Consulting.

 

Futures effectively consolidated, retracing Monday's gains, with the absence of short covering and weather forecasts bringing more moisture into the Midwest next week applying pressure to pin prices in negative territory, analysts said.

 

The market was overdue for a setback, with upside movement limited by producer and commercial hedging resting above the market, traders add. The theme was consistent throughout, with technical selling adding to the losses with declines accelerating once November futures slipped below support at Monday's low.

 

Meanwhile, weather remains the key driver of prices, but with favorable near-term conditions and the critical growing stage for soybeans not until August, Kleist said he would not anticipate any major breakout of the recent trading until the crops move into pod setting in August.

 

The latest computer generated weather models suggest the building of the Bermuda high into the southeastern U.S., said Mike Palmerino, meteorologist with DTN Meteorlogix. This occurrence would increase the possibility of Gulf moisture pushing into the Midwest, south and east of Des Moines, Iowa, on Monday and Tuesday.

 

The noon weather models show moisture being forced into the Midwest next week, offsetting early morning forecasts that had rains staying south of the Midwest crop belt, Palmerino said. However, there remains a possibility of a ridge holding moisture out of the Midwest in long-range outlooks, but the models haven't shown enough signs to estimate this as a legitimate threat to Midwest crops, Palmerino added.

 

Meanwhile, the U.S. Department of Agriculture's weekly grain inspections data for the week ended June 29 will be released after 11 a.m. EDT (1500 GMT) on Thursday, July 6. The report, normally released on Mondays, was rescheduled for Wednesday due to server problems. This report is now being delayed again due to continued server problems, but is expected to be resolved by release time Thursday. Analysts anticipate the inspections will fall within a range of 6 million to 12 million bushels.

 

In pit trades, RJ O'Brien bought 500 November, Calyon Financial, Citigroup and UBS Securities each bought 300 November. Man Financial sold 900 November, RJ O'Brien and Merrill Lynch each sold 500 November, Calyon Financial and Tenco each sold 400 November. Speculative funds were estimated net sellers on the day.

 

South American soybean futures ended lower, with the July future settling 18-cent lower at US$6.13.

 

 

SOY PRODUCTS

 

Soy product futures ended with a mixed bag, as spreading between the products created a divergence between soyoil and soymeal price direction, analysts said. Soymeal futures traded defensively, backpedaling in unison with declines in soybeans, traders said.

 

Soyoil futures were the strongest leg of the complex, managing to divorce itself from the bearish theme circulating through soybeans and soymeal. Speculative buying, soyoil/soymeal spreading and the speculative element attributed to biodiesel and its potential demand for soyoil amid higher crude oil prices helped underpin futures, analyst said.

 

July oil share ended at 43.15%, and the July crush ended at 76 1/2 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with speculative funds net sellers on the day.

 

In soyoil trades, Bunge Chicago bought 400 December, Fimat and Man Financial each bought 300 December, and Bunge Chicago sold 400 August. Speculative funds bought an estimated 2,000 contracts on the day.