July 8, 2008

 

CBOT Soy Review on Monday: Tumble limit down; weather sparks sales

 

 

Chicago Board of Trade soybean futures tumbled Monday, with most contracts dropping to their exchange-imposed 70-cent daily trading limits, as traders erased risk premium amid beneficial weather outlooks for crop development.

 

July soybeans settled 69 cents lower at US$15.89 and November soybeans ended 70 cents lower at US$15.61. Nevertheless, compared with last year, November soybeans are up 73.1%.

 

December soymeal settled US$20.00 lower at US$409.00 per short tonne. December soyoil finished 248 points lower at 66.50 cents per pound.

 

The market had built in a lot of premium on adverse weather in early June and forecasts for a heat ridge last week, said Brian Hoops, president Midwest Market Solutions in Yanktonne, S.D.

 

However, Midwest crop conditions are favorable and private crop estimates are pointing to less production losses from the floods, encouraging traders to extract some of the weather premium that propelled prices to record highs last week, Hoops added.

 

Speculative long liquidation was featured across all commodity sectors, with a stronger U.S. dollar, weakness in crude oil and metals generating broad-based selling interest, traders said.

 

Prices locked limit down for most of the day, as buyers ran for cover in the absence of fresh supportive news to support prices at record highs, traders added.

 

"Weather remains the key driver of prices, with extreme weather producing extreme volatility, and more normal conditions as forecasted for this week, forcing the trade to retreat from record levels," said Vic Lespinasse, analyst with grainanalyst.com.

 

Meanwhile, also fundamental bearish are expectations for U.S. soybean crops rated in good to excellent condition to improve by 1 to 2 percentage points from the previous week, where 58% of the crop was reported in the top- rated categories.

 

Soybean crop ratings have increased the past two weeks, with warm weather and plentiful soil moisture encouraging some rapid growth, said Bill Nelson, analyst with Wachovia Securities in a market report. That could lead to another net increase in the national rating, he says.

 

U.S. Department of Agriculture is scheduled to release its weekly crop progress report at 4 p.m. EDT Monday.

 

The DTN Meteorlogix weather forecast said showers and thunderstorms are on tap for the western Midwest through Monday night, moving into the eastern Midwest Tuesday. Most of the Midwest will receive from 0.3 to 1.5 inches of rain, with temperatures cooler early in the week and turning warmer late week. Meanwhile, some ridging is expected in the lower Mississippi Valley, but the heart of Midwest doesn't seem at risk, he added.

 

CBOT soybean and soymeal futures will trade with expanded daily trading limits Tuesday by virtue of settling limit down Monday. Soybeans will trade with US$1.05 a bushel limits and soymeal with trade with US$30.00 per short tonne limits, according to the CME Group Web site.

 

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

 

 

SOY PRODUCTS

 

Soy product futures ended sharply lower in step with declines in soybeans, succumbing to a vacuum of speculative fund selling seen across a broad spectrum of commodity markets. Spillover weakness from other feed grains and prospects for improved soy production potential added to the defensive tonnee, as prices locked at their US$20-per-short-tonne-lower daily trading limits, analysts said.

 

Soyoil futures plunged in unison with the rest of the complex but managed to settle off their 250-point daily limits where prices rested for most of the day. Scattered oil/meal spreading and end of the day position evening helped nudge futures off the lows, analysts added.

 

December oil share ended at 44.83% and the November/December crush ended at 70 1/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission, with speculative fund selling estimated at 2,000 lots.

 

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