July 31, 2007

 

Soybean, soyoil August deliveries seen moderate to large

 

 

Deliveries against the Chicago Board of Trade August soybean and soyoil contracts on first notice day Tuesday are expected to be moderate to large, analysts said.

 

Analysts expect deliveries against the CBOT August soybean contract to fall in a range of 1,000 to 2,000 lots, with most analysts leaning toward a range of 1,500 to 2,000 lots. Soyoil delivery notices are expected in a range of 1,000 to 2,000 contracts, while soymeal deliveries are seen between zero and 350 lots.

 

As of 5:00 p.m. EDT Friday, 4,764 soybean contracts, 12,006 soyoil contracts and 433 soymeal contracts were registered for delivery at CBOT approved warehouses.

 

Large end-of-marketing-year inventories and wide cash basis levels should generate some large deliveries, analysts said.

 

Currently there does not appear to be any economic incentive based on CIF levels for commercials to be aggressive stoppers of deliveries at this point, and that should attract some deliveries, analysts said.

 

The August/September spread was trading at an 8 cent carry at 1:08 p.m. EDT Monday.

 

"With basis levels at the Gulf of Mexico pretty weak, that takes away one pipeline for supplies to move to," said Terry Reilly, analyst with Citigroup Global Markets Inc. in Chicago.

 

The scenario provides some incentive for receipt holders to put out some supplies and save a few days of storage, as the threat of commercials stopping the deliveries and moving them to the gulf has been reduced due to current basis levels, he said.

 

From a short-term perspective, it does appear that putting out receipts without the threat of strong commercial stoppers would attract some sizable deliveries in an effort to save some storage costs, said Don Roose, president US Commodities in West Des Moines, Iowa.

 

However, basis levels are historically wide, and should improve into the end of the year, Roose said. Supplies are viewed as valuable long term, and that may limit the willingness of commercials to expose inventories to the delivery process, he said. With large available soyoil inventories and demand from the biodiesel industry not at levels to draw down current inventories, holders of receipts maybe willing put out a large quantity, traders said.

 

Nevertheless, export volumes have picked up in past weeks and with bullish long-term views for world vegoil demand, soyoil has become more valuable and may limit deliveries, analysts said.

 

The general consensus based on prior delivery periods has analysts suggesting large deliveries, but that remains tied to the intentions of the big commercials, traders said.

 

Most analysts only anticipate modest soymeal delivery notices, if any, to be posted on first notice day. Strong domestic usage of meal and only a small amount registered at CBOT should promote small deliveries if any against August soymeal, analysts said.