July 18, 2006

 

CBOT Soy Review on Monday: Lower; backpedals on speculative sales

 

 

Chicago Board of Trade soybean futures ended Monday's session posting double-digit declines, backpedaling on speculative sales amid technical weakness and improved weather outlooks for the Midwest.

 

August soybeans ended 13 cents lower at US$5.90, November soybeans finished 13 3/4 cents lower at US$6.11 1/4, December soymeal settled US$3.80 lower at US$172.80 a short tonne, and December soyoil ended 63 points lower at 27.70 cent a pound.

 

A cooldown in temperatures coupled with scattered showers moving into the Midwest during the next week encouraged traders to trim premium from prices, and with technical support breached, futures easily tumbled to lower levels, analysts said.

 

Speculative sales were a featured attraction, with pre-placed sell orders activated once the active November future dropped below its 50-day moving average and subsequently filled a gap left on technical charts from June 30.

 

After a weekend of stressful heat across the corn belt, futures were taken back by forecasts suggesting significant declines in temperatures and better chances of rainfall. The theme was consistent from the outset, with declines accelerating into the close as prices took out underlying support down the stretch, traders added.

 

Meanwhile, lingering concerns over dryness in the northwestern Midwest and outlooks for a possible decline in crop ratings from the U.S. Department of Agriculture Monday afternoon managed to limit downside potential.

 

The Midwest is poised for a dramatic decline in temperatures to average to below-average readings after a cool front moves into the region Thursday, said John Dee, meteorologist with Global Weather Monitoring in Lake Linden, Mich. The best chance of below-average temperatures will be in the Great Lakes region, with thunderstorms expected to flair up across the belt, but no all- encompassing rain events are seen for the next week, Dee added.

 

"It's hard to pinpoint where the rain will be during the week, but the central Midwest, with eastern Iowa, northern Illinois, northern Indiana and northern Ohio have the best rain potential," said Dee.

 

After the close, USDA is scheduled to release its weekly crop progress report 4 p.m. EDT (1500 GMT). Analysts anticipate soybean crop ratings will come in 1 to 3 percentage points lower. USDA said 58% of the U.S. soybean crop was in good-to-excellent shape in last week's report.

 

In pit trades, JP Morgan bought 800 November. Calyon Financial, Man Financial and JP Morgan each sold 1,000 November, ABN Amro sold 600 November, and RJ O'Brien and Rand Financial each sold 500 November. Speculative fund selling was estimated at 5,000 contracts.

 

South American soybean futures ended lower, with the August future settling 13-cent lower at US$6.25.

 

 

SOY PRODUCTS

 

Soy product futures retreated in step with soybean declines. Soymeal continued to follow soybeans, carving out a new contract low in the active December future amid the absence of supportive attributes to underpin prices. However, futures did manage to gain product share at the expense of sharp declines in soyoil.

 

Soyoil futures fell to over one-week lows, pressured by speculative sales. The energy impact on the market remains the key driver of prices, and with crude oil futures taking a step back, speculative funds emerged as sellers on the day, analysts say. Technically inspired selling helped extend the losses, with speculative sales picking up amid the December contracts ability to penetrate underlying support at recent lows, traders added.

 

August oil share ended at 44.22%, and the July crush ended at 76 1/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with Fimat buying 400 December, and Iowa Grain selling 500 December. Speculative fund selling was estimated at 1,500 contracts.

 

In soyoil trades, Fimat bought 1,500 December and Bunge Chicago bought 800 August. Fimat sold 1,200 December, Man Financial sold 900 December, Calyon Financial sold 400 December. Speculative fund selling was estimated between 3,000 and 4,000 contracts.