July 17, 2007
CBOT Soy Review on Monday: Settle limit down; change in weather forecast
Chicago Board of Trade soybean futures ended sharply lower, falling to the lower 50-cent daily trading limits Monday, as speculative traders extracted risk premium amid improved Midwest weather outlooks.
August soybeans settled 50 cents lower at US$8.71 3/4, and November soybeans finished 50 cents lower at US$8.98 3/4. August soymeal settled US$19.90 lower at US$235.70 per short tonne. August soyoil ended 74 points lower at 37.23 cents a pound.
The market essentially priced in a reversal of last week's weather premium, as the change in near-term forecasts with less heat and more rain forecast for the Midwest encouraged traders to reduce some length in the market, said Tim Hannagan, analyst with Alaron Trading in Chicago.
Speculative selling was a featured attraction, with less threatening weather forecasts serving as catalysts to keep buyers on the run, analysts said. The market spiraled lower from the outset, with the need to correct from overbought conditions adding pressure as well, analysts added.
Nevertheless, the declines were seen as a short-term correction from a string of recent contract highs, as bullish long-range supply and demand fundamentals coupled with solid underlying technical support are seen limiting downside pressure, a CBOT trader said.
Despite the milder weather forecasts for this week, the longer-range outlook remains supportive. Warmer-than-normal and drier-than-normal long-range forecasts at the critical soybean pod-filling stage are seen keeping prices firmly underpinned, said Hannagan.
A lower open Tuesday could easily result in a higher close, as declining crop ratings coupled with half of the Midwest crop belt still having moisture issues keep the long-range trend higher, Hannagan added.
The DTN Meteorlogix weather forecast calls for episodes of showers and thunderstorms in the Midwest soybean belt during this week. Temperatures will not be as hot as previously expected, notably from the Mississippi Valley east. Reproductive soybeans will benefit from this improved weather pattern. Rainfall will range up to 1 1/2 inches in the eastern Midwest, and up to three-quarters of an inch in the western Midwest. There will be some stress to crops in the western areas of the region, however, due to further drying of soils, Meteorlogix reports.
In electronic trade, there are 19,491 contracts offered to sell at the lower trading limit of US$8.98 3/4 basis the most active Nov contract at the close.
In pit trades, speculative fund selling was estimated at 11,000 contracts. Tenco and Term Commodities each bought 1,000 November and RJ O'Brien bought 300 November. Rand Financial sold 1,500 November, Tenco, Man Financial, and RJ O'Brien each sold 1,000 November, Fortis sold 800 November, and Penson GHCO and JP Morgan each sold 500 November.
SOY PRODUCTS
Soy product futures plunged lower in unison with soybeans. The markets backpedaled on ideas improved near- term Midwest weather took some risks of yield and supply declines away from soybeans, analysts said.
Soymeal futures were the downside leader of the products, as the market remains more sensitive to soybean supply issues than soyoil, analysts said. Soymeal has rallied sharply in step with soybeans recently, so it was natural for the market to retreat with a large setback in soybeans, a CBOT floor analyst said.
Soyoil futures were lower as well, succumbing to speculative-induced selling pressure. The market effectively trimmed a little risk premium, with traders banking a few profits and staging a modest adjustment in product spreads, analysts added.
August oil share ended at 44.13% and the August crush ended at 56 1/4 cents.
In soymeal trades, buyers and sellers were scattered among various commission houses, with speculative funds estimated sellers of 5,000 contracts.
In soyoil trades, Bunge Chicago bought 300 December, and JP Morgan and Fimat each bought 300 October. Sellers were scattered among various firms with speculative fund selling estimated at 3,000 lots.
