July 8, 2009

 

CBOT Soy Review on Tuesday: Tumble to 2-month lows; long liquidation

 

 

Chicago Board of Trade soy futures tumbled Tuesday, plunging to more than two-month lows on technically inspired speculative long liquidation.

 

CBOT July soys settled 66 1/2 cents lower at US$11.33 and November soys finished 68 cents lower at US$8.95. In pit trades, speculative fund selling was estimated at 7,000 lots in soys, 1,000 lots in soymeal and 2,000 lots in soyoil.

 

July soymeal settled US$20.20 lower at US$381.00 per short tonne, and December soymeal ended US$20.00 lower at US$281.00. December soyoil finished 138 points lower at 33.72 cents per pound. The sharp declines were very technical in nature, with speculative fund selling triggered once active contracts penetrated underlying chart support, said Dan Basse, president of AgResource Co. in Chicago.

 

Most active contracts slipped to their lowest levels since April, with most contracts briefly retreating to their exchange-imposed lower daily trading limits of 70 cents a bushel.

 

Bearish economic signals from outside markets, with a firmer U.S. dollar, stumbling crude oil futures and losses in equities sent buyers running for cover.

 

"Soys and soymeal were the last of the CBOT grain complex holding big speculative longs and once the liquidation spread across broader markets, large speculative traders covered long positions," said Basse.

 

The unwinding of bean/corn and bean/wheat spreads added to the downward push in soys. Otherwise, traders had little fresh fundamental news to draw on, opening the door for outside markets to have a strong influence on price movement.

 

Favorable near-term weather conditions for developing crops added to the defensive theme, with traders extracting some risk premium from prices.

 

The DTN Meteorlogix forecast calls for continued beneficial weather conditions for Midwest corn and soy development. A short period of hot weather is in store for the region during this week. However, the heat will back away during the coming weekend.

 

As an example of the favorable growing conditions, Iowa has less than 10% of its soil moisture rated short to very short, Meteorlogix said. This indicates a plentiful amount of soil moisture available for crop development, Meteorlogix said.

 

 

Soy Products

 

Soy product futures plunged in unison with soys. Soymeal was the downside leader of the products, with long liquidation pressure dropping most active contracts to their US$20 exchange-imposed lower daily trading limit.

 

Soyoil futures fell in step with the rest of the complex, with weakness in crude oil spillover attracting speculative selling as well. However, soyoil managed to find some underlying support from the unwinding of meal/oil spreads, traders said.

 

December oil share was 37.38%, while the November/December soy crush ended at 94 cents.