August 15, 2006

 

CBOT Soy Review on Monday: Market edges higher; retraces early losses

 

 

Chicago Board of Trade soybean futures ended modestly higher Monday, managing to recover from early price weakness, as oversold conditions offset bearish crop conditions.

 

November soybeans finished 1 cent higher at US$5.69 1/4. December soymeal settled US$1.60 higher at US$164.80 a short tonne, while December soyoil ended 30 points lower at 25.72 cent a pound.

 

Speculative-led selling fueled the early weakness, but the market's inability to push the expiring August contract through support at the US$5.45 1/2 level coupled with oversold ideas exhausted selling to stabilize prices, analysts said.

 

The Relative Strength Index for November soybeans stands at 26.28 at Monday's close. An RSI reading below 30.00 is considered oversold.

 

Nevertheless, aggressive buying remained scarce, as the bearish fundamental makeup of the market continues to cap upside potential, traders added.

 

Meanwhile, moderating August temperatures and more rainfall so far this month in many growing areas has prompted a negative reaction to Friday's lower-than-expected soybean production forecast from U.S. Department of Agriculture, said Jerry Gidel of North America Risk Management Services in a market report.

 

The potential for soybean yields to expand in August coupled with ample supplies is the key driver of price weakness in the market, analysts added.

 

"The trend is obviously lower in the market. However, I'm looking for some type of short-term bounce, possibly staring tomorrow, but for anyone who is looking to get long the grain complex, they would need to be very cautious," said Nick Leblebijian President-CEO Lakefront Futures & Options, L.L.C..

 

Meanwhile, the DTN Meteorlogix forecast calls for a few more showers to move through the Midwest during the first half of the week, moving from the western half of the region (west of the Mississippi River) into the eastern and southeastern areas through the Ohio Valley. The showers will be accompanied by temperatures ranging from near-normal to a few degrees above normal, but there is no hot weather ahead for the region.

 

Recent rains have done much to stabilize crop conditions in the western Midwest, and the growing season in general has been favorable for crops in the eastern Midwest, Meteorlogix added.

 

After the close at 3 p.m. CDT USDA is scheduled to release its weekly crop progress report. Analysts anticipate soybean crops rated in good-to-excellent to improve by 2 to 4 percentage points.

 

In pit trades, ADM Investor Services bought 1,000 September, DT Trading bought 500 November and Stern bought 400 November.

 

On the sell side, Goldenberg Hehmeyer sold 1,000 September, and FCStonnee and O'Connor each sold 500 November. Speculative funds were net sellers on the day.

 

South American soybean futures ended flat, with the August future settling unchanged at US$6.00.

 

 

SOY PRODUCTS

 

Soy product futures ended mixed Monday, with soyoil the leader to the downside, while soymeal was supported by the unraveling of soy product spreads. Soyoil futures stumbled to seven week lows, pressured by long liquidation pressure, as the market corrects from prior gains in step with the retreat in crude oil futures, analysts said. The energy component of soyoil in relation to biodiesel continues keep crude oil a key influence on the market, analysts added.

 

Soymeal futures finished in positive territory Monday, supported throughout the day by the unwinding of soyoil/soymeal spreads. Soymeal benefited from soyoil's weakness, allowing the market to recapture some product share, a trader said.

 

August oil share ended at 44.01%, and the August crush ended at 73 3/4 cents.

 

In soymeal trades, Rand Financial bought 1,000 December, with Calyon Financial a seller of 400 December and Fimat selling 300 December.

 

In soyoil trades, Tenco bought 1,500 September, Bunge Chicago bought 400 December and Citigroup bought 900 December. Man Financial sold 1,000 December, Fimat sold 500 December, JP Morgan sold 400 December, and RJ O'Brien sold 300 December. Speculative fund selling was estimated near 2,500 contracts.