August 12, 2006

 

CBOT Soy Review on Friday: Entrenched in down trend; Spec sales press

 

 

Chicago Board of Trade soybean futures ended lower across the board Friday, as speculative sales continue to keep futures firmly entrenched in a bearish trend.

 

August soybeans ended 6 cents lower at US$5.51, November soybeans finished 6 cents lower at US$5.68 1/4. For the week, November soybeans dropped 28 3/4 cents, and for the current down move November soybeans have dropped 74 1/4 cents from the July 11 US$6.39 1/2 high to Friday's low of US$5.65 1/4.

 

December soymeal settled US$0.50 higher at US$163.20 a short tonne, while December soyoil ended 78 points lower at 26.02 cent a pound.

 

The speculative fund sales dictated price direction, with favorable crop conditions promoting ideas U.S. soybean yields will be aided by benign August weather, kept buyers on the run, analysts said.

 

The supportive production, yield and carryout projections were taken with a grain of salt, said a floor analyst. Talk across the trading floor was the U.S. Department of Agriculture's numbers would probably be the smallest of the season if early August weather remains consistent, leading to rising supply outlooks.

 

Spillover pressure from the neighboring grain markets helped keep bearish sentiment alive, with technically motivated selling, leaving little opportunity for upside potential, traders added.

 

Meanwhile, the DTN Meteorlogix forecast calls for a continued pattern of showers and thunderstorms across the entire Midwest. These showers will benefit crop yield prospects, due to the soybean growth cycle reaching its main reproductive stage this month.

 

Ahead of the open, USDA reported 2006-07 soybean production at 2.928 billion bushels versus the average of trade estimates at 3.020 billion. Soybean yield is projected at 39.6 bushels per acre, down 3.7 bushels from 2005's record yield and below the average of trade estimates at 40.8. 2006-07 U.S. ending stocks are estimated at 450 million bushels, well below the average of trade estimates at 571 million. 2005-06 ending stocks were trimmed to 515 million bushels from July's estimate of 545 million.

 

In pit trades, Calyon Financial bought 1,700 November, Man Financial bought 1,000 November and JP Morgan bought 800 November.

 

On the sell side, Fimat and JP Morgan each sold 1,000 November. ADM Investor Services, Goldenberg Hehmeyer, Man Financial, O'Connor, Prudential, RJ O'Brien and Rand Financial each sold 500 November on the day. Speculative fund selling was estimated between 4,000 and 5,000 contracts.

 

South American soybean futures ended lower, with the August future settling 8 cents lower at US$6.00.

 

 

SOY PRODUCTS

 

Soy product futures retreated in unison with soybean weakness. Soyoil backpedaled, plunging to its lowest level since late June on technically motivated speculative sales. The absence of supportive fundamental influences, and with crude oil not providing much leadership, the market shook a few longs loose, said a CBOT commission house broker. Long liquidation was a feature attraction, with the most active December contract uncovering pre placed sell orders to send prices tumbling once the contract penetrated meaningful technical support at major moving averages, analysts said.

 

Soymeal ended marginally higher after setting new contract lows in early action. The market benefited from the unwinding of soyoil/soymeal spreads, traders said.

 

August oil share ended at 44.39%, and the August crush ended at 79 1/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses. Speculative finds were estimated net sellers on the day.

 

In soyoil trades, FCStonnee bought 700 December, JP Morgan bought 600 December and Fimat bought 1,600 December. Man Financial sold 3,000 December, FCStonnee and ABN Amro each sold 1,200 December, and Fortis sold 1,000 December. Citigroup and JP Morgan each sold 500 December. Speculative fund selling was estimated between 10,000 and 12,000 contracts.