July 25, 2008

 

CBOT Soy Review on Thursday: Stumbles on weather, liquidation pressure

 

 

Chicago Board of Trade soybean futures ended lower Thursday, continuing the market's near-term bearish theme on speculative liquidation pressure and beneficial near-term crop conditions.

 

August soybeans settled 9 1/4 cents lower at US$13.85 and November soybeans ended 11 cents lower at US$13.73.

 

December soymeal settled US$1.80 lower at US$359.80 a short tonne. December soyoil finished 35 points higher at 60.20 cents a pound.

 

The combination of good weather for crop development and funds liquidating length served as the catalysts to drop prices to seven-week lows, said Joe Victor, analyst with Allendale Inc.

 

The U.S. soybean crop has cooperative weather forecast for 7 to 10 days and that is taking some edge off prices, Victor added.

 

Continued talk of speculative traders remaining overextended in commodities enticed funds into trimming length in the market, traders said.

 

Technical weakness, with active contracts penetrating support at Wednesday's lows aided the defensive tonnee. However, traders remain skeptical of pressuring prices too far amid the many uncertainties relating to acreage, yield and production, particularly with the critical growing month of August still ahead.

 

Higher-than-expected weekly export sales and bullish supply and demand balance tables are underlying features limiting downside risk as well, analysts added.

 

Meanwhile, the funds have liquidated about 25% of its length in CBOT soybeans compared with 50% in corn futures, and if the trend follows corn, soybeans could drop another 75 cents if a weather scare doesn't arise, Victor added.

 

The DTN Meteorlogix forecast calls for up to two inches of rain to develop over the western and central Midwest during the next three days. Some localized flooding is possible, but additional rains as corn and soybeans go into their reproductive phases will be viewed as generally beneficial to crops.

 

Temperature trends in the U.S. over the next five days remain favorable for crops. There are no signs of any significant hot and dry weather over the majority of the Corn Belt, Meteorlogix said. There is some heat stress in Kansas, but areas farther north and east - the remaining 75% of the Corn Belt - has very few concerns over temperature trends, Meteorlogix forecasts.

 

The U.S. Department of Agriculture reported total weekly soybean export sales were a net 735,400 metric tonnes. Analysts had forecast sales between 200,000 and 500,000 metric tonnes. Net sales for the 2007-08 crop year totaled 183,000 tonnes for the week ended July 17. Sales for the 2008-09 marketing year were 552,400 tonnes.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative fund selling estimated at 3,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended mixed, with soyoil managing to recover from earlier weakness on spillover support from a late bounce in crude oil futures. Soymeal futures ended lower, succumbing continued speculative liquidation pressure and borrowed weakness from soybeans, traders said.

 

December oil share ended at 45.55% and the November/December crush ended at 80 3/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission, with speculative fund selling estimated at 1,000 lots.

 

In soyoil trades, buyers and sellers were scattered among various commission houses.