July 24, 2007

 

CBOT Soy Review on Monday: Plunge lower on weather, speculative sales

 

 

Chicago Board of Trade soybean futures ended sharply lower Monday, plunging to nearly one-month lows as speculative traders trimmed length and extracted risk premium amid improved Midwest weather outlooks.

 

August soybeans settled 34 cents lower at US$8.16 1/4, and November soybeans finished 34 1/4 cents lower at US$8.41. August soymeal settled US$10.80 lower at US$214.40 per short tonne. August soyoil ended 82 points lower at 36.67 cents a pound.

 

The market effectively erased weather premium, as the change in near-term forecasts with less heat and more rain forecasted for the Midwest encouraged speculative long liquidation, a CBOT floor analyst said.

 

Speculative selling was featured, with prices spiraling lower as technical weakness aided the declines, traders said. Pre-placed sell stop orders, activated as prices dipped below major moving average support and filled a chart gap left from June 29 basis the November contract, accelerated losses to 3 1/2 week lows, analysts added.

 

The market continues to hold heavy speculative fund length, but without fresh bullish stimuli to spark buying interest, weaker longs were easily chased out of the market after prices tumbled US$1.07 3/4 a bushel in value since July 13, a floor trader said.

 

Nevertheless, despite a recent price collapse, traders said bullish long-range supply and demand fundamentals should limit future downside pressure with end user buying seen supporting price breaks as well, a CBOT trader said.

 

The DTN Meteorlogix forecast calls for rainfall of up to three-quarters of an inch in Iowa and Missouri through Tuesday. Later in the week, the eastern Midwest will receive rainfall of up to one inch, with locally heavier amounts in Illinois, Indiana and Ohio. This will be beneficial to soybeans in the flowering and pod-setting stages. Meanwhile, row crop areas of eastern South Dakota and southwest Minnesota continue to be drier than the balance of the Midwest during the week, Meteorlogix forecasts.

 

The U.S. Department of Agriculture is scheduled to release its weekly crop progress report at 4 p.m. EDT on Monday. Analysts anticipate U.S. soybean good-to-excellent crop ratings improving in a range of 1 to 2 percentage points.

 

In pit trades, Rand Financial bought 800 November, Term Commodities bought 300 November and ADM Investor Services bought 400 November. JP Morgan, Fortis, and UBS Securities each sold 1,000 November, RJ O'Brien sold 800 November, and Penson GHCO and Man Financial each sold 300 November. Speculative fund selling was estimated between 8,000 and 9,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended lower across the board, stumbling in unison with the sharp declines in soybean futures. Speculative selling was featured in both markets, as funds trimmed length amid reduced production fears for soybeans amid improved near term weather outlooks. Soymeal futures were the downside leader of the products, with the combination, soybean spillover, unwinding of meal/oil spreads and technical weakness weighing on prices, analysts said. Active contracts were pressured by technical weakness also, with futures dropping to their lowest levels since May 31.

 

Soyoil futures backpedaled with the rest of the complex, but the ability of active contracts to hold major moving average support and underlying world vegoils demand strength helped limit downside movement, analysts said.

 

August oil share ended at 46.10% and the August crush ended at 58 3/4 cents.

 

In soymeal trades, JP Morgan bought 500 December, Fimat bought 500 March, 500 May, 500 July and 500 August. Fimat sold 700 December and JP Morgan sold 300 August. Speculative fund selling was estimated at 2,000 lots and commercial buying was estimated at 2,000 lots.

 

In soyoil trades, Citigroup bought 300 August and 400 December, Iowa Grain bought 600 December, Fimat bought 300 September and 400 December. Fimat sold 800 December, Fortis sold 1,100 December and RJ O'Brien sold 300 December. Speculative fund selling was estimated at 4,000 lots and commercial buying was estimated at 2,500 lots.