July 22, 2009

 

CBOT Soy Review on Tuesday: Lower; weather, crops looking nearly ideal

 

 

Soy complex futures at the Chicago Board of Trade closed lower and near the session lows Tuesday, pressured by continued good growing weather in the U.S. Corn Belt, with more of the same in the extended forecasts.

 

August soys closed down 18 1/4 cents at US$10.14 3/4 a bushel. New-crop November soys were down 17 1/4 cents at US$9.05 3/4.

 

"Favorable weather has led to strong crop ratings for (soys), which is making it hard for futures to gain traction," said a Midwest-based grains analyst. "Forecasts suggest the mild conditions will extend until at least the end of July. And the long-term outlook calls for the mild conditions to continue into fall," the analyst said.

 

"Big crops get bigger," added Dax Wedemeyer, broker/analyst at U.S. Commodities in Des Moines. He said the good growing weather will continue to cap any rally attempts in the soy complex futures.

 

USDA reported Monday afternoon the condition of the U.S. soy crop improved modestly over the last week, with 67% of the crop rated good or excellent compared to 66% in the top two categories last week. USDA reported 44% of the soy crop was blooming as of Sunday.

 

In a research note released Monday, the University of Illinois' Darrel Good estimated the U.S. soy yield at 44.7 bushels an acre, up from the USDA's July estimate of 42.6 bushels an acre. "The yield expectations based on current crop ratings or the assumption of favorable weather for the rest of the season are well above the long-term trend calculation for 2009 " he said in the note. "There is an extremely high correlation between the percent of the crop rated good or excellent at the end of the season and the U.S. average trend adjusted yield," he said. With high yields comes low prices, and Good said all factors point to "prospects of large supplies and further price weakness into harvest."

 

The specter of China soon auctioning some of its soy stocks is also a negative fundamental in the market at present, said the Midwest analyst.

 

Technically, November soy futures prices remain in a five-week-old downtrend on the daily bar chart. The next upside price objective for the bean bulls is to push and close November prices above solid technical resistance at US$9.75 a bushel. The next downside price objective for the bears is pushing and closing prices below solid technical support at the July low of US$8.81 1/4 a bushel.

 

Soy futures on the Dalian Commodity Exchange in China closed slightly lower Tuesday as the market consolidated. Demand was termed light amid little fresh market-moving news.

 

 

Soy Products

 

Soy product futures at the Chicago Board of Trade also closed lower and near their session lows Tuesday, amid the nearly ideal growing weather in the U.S. midsection.

 

December soy oil closed down 67 points at 35.37 cents. December soy meal futures closed down US$2.40 at US$272.50.

 

Soy oil futures continue to closely track the crude oil futures market, said the Midwest analyst. Any big price moves in crude will likely find soy oil prices moving in the same direction, he said.