August 7, 2007

 

CBOT Soy Review on Monday: Stumbles lower on beneficial weather

 

 

Chicago Board of Trade soybean futures ended lower Monday, posting double digit declines, as the market extracted weather premium following beneficial weekend rains in dry areas of the Midwest.

 

August soybeans settled 13 cents lower at US$8.26, and November soybeans finished 11 cents lower at US$8.50. August soymeal settled US$1.50 lower at US$220.70 per short tonne. August soyoil ended 81 points lower at 36.54 cents a pound.

 

Weather once again served as the driver of prices, with better-than-expected weekend rains and forecasts for warm, wet conditions through midweek enticing traders to trim some risk premium from prices, analysts said.

 

Soybean prices are a function of production, and prospects for soy output just went up following this rain event, as soybean yields are determined in August, according Roger Knapp, analyst with STA Trading Services in Memphis Tenn.

 

Technical selling aided the defensive tonnee for most of the day. However, once selling pressure was exhausted and some private weather forecasters talked of portions of the Midwest that still hold some dryness concerns, traders managed to trim declines, analysts added.

 

Nevertheless, the market remained firmly planted in negative territory, with spillover weakness from soyoil applying added pressure, traders said. Meanwhile, technical bulls were encouraged by the November contract's ability to settle above its 10-day moving average and at the psychological US$8.50 level, traders added.

 

The DTN Meteorlogix Weather forecast calls for another round of up to two inches of rain in the western Midwest during the first half of this week, and up to one-half inch of rain in the eastern Midwest. This moisture will help improve soybean yield prospects in the northern two-thirds of the U.S. corn and soybean belts.

 

The southern and southeastern areas of the Midwest - from southeast Missouri through the Ohio Valley - along with the Mississippi Delta, had dry and hot weather during the past weekend. This weather pattern will continue during the first half of the week, bringing significant crop stress. Concern over this potential damage to crops may serve to limit the bearish tonnee to the market caused by the rain in the northern and central Midwest, Meteorlogix added.

 

In other news, Brazil's soy planted area is seen increasing by 5.4% to 21.9 million hectares, agribusiness consultancy Celeres said Monday. The figure is on par with current market estimates for the 2007-08 crop, which soy growers start planting in October.

 

In pit trades, buyers and sellers were scattered among various commission houses. RJ O'Brien sold 400 November, and Fimat sold 300 November, with speculative fund selling estimated at 3,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended lower across the board, backpedaling in unison with soybeans. Soyoil futures were the downside leader of the products, with prices tumbling to 2-week lows. The market was influenced by soybeans, overnight declines in Malaysian palm oil and a sharp drop in crude oil futures, analysts said.

 

Soymeal futures retreated on the back of soybean weakness, as improved yield prospects for soybeans applied pressure, analysts said. However, the market continued to gain product share on soyoil weakness and meal/oil spreading, traders added.

 

August oil share ended at 45.29% and the August crush ended at 61 1/2 cents.

 

In soymeal trades, Fimat and Fortis each bought 400 December, while sellers lightly scattered among various commission houses.

 

In soyoil trades, Fimat bought 500 December and Bunge Chicago bought 300 December. JP Morgan sold 300 September, Fimat and Fortis each sold 300 December, and Iowa Grain sold 200 December. Speculative funds were estimated sellers of between 3,000 and 4,000 lots.