July 11, 2009

 

CBOT Soy Review on Friday: Bounce from lows on short covering

 

 

Soy futures at the Chicago Board of Trade ended mixed Friday, with most contracts managing to recover from sharp early declines on a speculative short-covering bounce.

 

CBOT July soys settled 17 3/4 cents higher at US$11.28 1/4 and November soys finished 1 cent higher at US$9.17. In pit trades, speculative fund selling was estimated at 1,000 lots in soys and soyoil each.

 

July soymeal settled 80 cents higher at US$372.30 a short tonne, and December soymeal ended 70 cents lower at US$289.30. December soyoil finished 9 points higher at 33.47 cents a pound.

 

The market was very oversold, and once outside markets pared their early losses, selling exhausted and shorts began to cover some positions heading into the weekend, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

"The ability of the market to recover from 30-cent losses was impressive, sending a signal that maybe the market had sold off enough," Scoville said.

 

The market had dropped by 13% to 19% since early June.

 

The nearby July futures led the recovery, as the evening of positions ahead of Tuesday's expiration spiked the front end of the market in thin trade.

 

Futures initially stumbled on bearish economic influences reflected in a firmer U.S. dollar, lower crude oil futures and weakness in equities. Slightly negative supply and demand data from the U.S. Department of Agriculture added to the defensive tonnee.

 

However, the USDA report did not provide anything new to sustain the sharp declines, and with a lot of growing season left to go, particularly with a late-planted crop this year, the market found underpinning support, Scoville said.

 

Nevertheless, growing speculation that recent price action reflecting the old crop carryout may not be as tight as previously thought is seen limiting advances. Favorable near-term crop conditions are seen weighing on prices as well.

 

The DTN/Meteorlogix forecast calls for a mostly favorable weather pattern for developing soys in the Midwest. Hot temperatures, if any, are expected to be brief and mainly confined to western and southern areas.

 

The USDA projected 2008-09 U.S. soy ending stocks of 110 million bushels, unchanged from its June estimate and slightly higher than the average analyst estimate of 107 million bushels. The USDA projected 2009-10 soy ending stocks of 250 million bushels, up from the June estimate of 210 million. Analysts on average estimated ending stocks of 229 million bushels.

 

 

Soy Products

 

Soy product finished mixed, with soymeal rising from early lows in unison with the bounce in soys. Pre-weekend short covering amid trader ideas that recent declines were overdone provided a spark to trim early losses, analysts said.

 

Soyoil futures edged higher, rebounding from early losses. The market found support from speculative short covering arising after crude oil futures pared their losses, as well as the unwinding of soymeal/soyoil spreads, traders said.

 

December soyoil share was 36.7%, while the November/December soy crush ended at 88 cents.