July 19, 2008

 

CBOT Soy Review on Friday: Sinks on favorable weather, Argentina

 

 

Chicago Board of Trade soybean futures tanked Friday on favorable weather forecasts and expectations for an increase in global supplies after Argentina said it would revoke a controversial sliding-scale export tax scheme.

 

Nearby August soybeans dropped 51 cents to US$14.70 per bushel, and November soybeans sank 50 cents to US$14.48. December soymeal fell US$13.10 to US$376.80 per short tonne, and December soyoil tumbled 138 points to 63.50 cents per pound.

 

Mild weather expected in the U.S. Midwest next week was seen as beneficial for the crop and bearish for the market, an analyst said. Temperatures are not expected to be "particularly hot for most areas," T-Storm Weather said in an update to its daily forecast.

 

"The weather reports going into next week are pretty simple - nothing in the 90s" Fahrenheit, said Tim Hannagan, analyst for Alaron. "They also have rain ... not a lot of rain, but timely rain. It really looks like ideal weather."

 

The revocation of Argentina's sliding export tax, meanwhile, should mean an end to strikes and roadblocks that impeded soy exports during the past four months, traders said. The export duty on soybeans and other grains will return to levels set by a November resolution, with soy shipments are taxed at a fixed 35% rate.

 

"Basically, what's happened in Argentina is that the farmers' protests have really resulted in them holding back their soybeans to some extent," said Anne Frick, senior oilseed analyst for Prudential Bache. "This has really resulted in pent-up supplies. There is now a narrowing window of opportunity for them to sell those supplies to take advantage of high international prices ahead of the U.S. soybean harvest."

 

Some farmers may need to earn revenue from exports to plant the next soybean crop, Frick said. Soy is Argentina's leading crop.

 

Soybeans "fell out of bed" after news about the export tax broke, a CBOT floor broker said. Commodity funds sold an estimated 8,000 contracts, a trader said.

 

The losses for soybeans Friday followed a sharp sell-off Thursday. In the last two days of the week, November soybeans, which represent the new crop, lost US$1.00.

 

 

Soy Products

 

CBOT soy product futures ended deep in negative territory with soybeans. Commodity funds sold an estimated 3,000 soymeal and 3,000 soyoil, traders said.

 

The products were pressured by the announcement that Argentina would cancel its controversial sliding export tax. Argentina is a big exporter of soy products, along with soybeans.