August 15, 2007

 

CBOT Soy Review on Tuesday: Stumbles lower, extracts risk premium

 

 

Chicago Board of Trade soybean futures ended sharply lower Tuesday; extracting risk premium as beneficial rains move toward drier areas of the central Midwest.

 

September soybeans settled 15 cents lower at US$8.51, and November soybeans finished 15 3/4 cents lower at US$8.66. September soymeal settled US$3.60 lower at US$233.40 per short tonne, and December soymeal settled US$4.20 lower at US$239.90. September soyoil ended 65 points lower at 35.96 cents a pound, and December soyoil finished 68 points lower at 36.67.

 

The market gave back some premium Tuesday, with showers forecast for dry areas of the Ohio River Valley and the possibility of a tropical depression to bring some moisture to the southeast U.S. attracting speculative selling, said John Kleist of Kleist Ag Consulting.

 

The moisture is seen as timely for soybean crops moving through their critical yield development stage, analysts said. "If the rains are verified over the course of the week, we could see the 25% of the U.S. soy crop that is said to be suffering from dryness to be trimmed to 15%," a CBOT commission house broker said.

 

General liquidation pressure from an early drop in the U.S. stock market uncovered fresh selling, with declines accelerating as sell stops were triggered as active contracts penetrated below major moving average support, analysts added.

 

Nevertheless, the market still has good support beneath prices, and downside risks should remain limited as shifting weather forecasts will continue to produce extremes in the market, a CBOT trader added.

 

Meanwhile, the DTN Meteorlogix weather forecast calls for several periods of rain showers along with milder temperatures in the upper Midwest crop areas during the balance of this week. Rainfall over the next five days will total up to 1.5 inches. "This is a beneficial outlook for soybean pod filling," Meteorlogix said.

 

"Southeast areas of the Midwest continued to suffer from mostly dry and hot conditions which increase stress on filling crops. The situation is also stressful in the Delta. Hot and dry weather will continue to increase stress on filling crops for at least the next five days," Meteorlogix reports.

 

"The next six to 10 days offer an uncertain weather scenario for the central U.S. Both U.S. and European forecast models are suspect. Thus, we look for rainfall to again concentrate on the Interstate 80 corridor in the western and northern Midwest, but for more heat stress from central Illinois southward," Meteorlogix reports.

 

In pit trades, Rand Financial bought 600 November; and Fimat, Man Financial, and RJ O'Brien each sold 500 November. Speculative fund selling was estimated at 4,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended lower across the board Tuesday, succumbing to speculative-led selling in step with weakness in soybeans. Soymeal futures fell with soybeans, but managed to not lose product share as the market continues to find strength to hold well above major moving average support, analysts said.

 

Soyoil futures, in contrast, are holding firmly below major moving average resistance, with technical selling and meal/oil spreading helping drop prices to more than six-week lows, analysts said.

 

December oil share ended at 43.32%, and the September crush ended at 58 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with Tenco a featured seller of 800 December. Speculative fund selling was estimated at 1,500 lots.

 

In soyoil trades, Fimat sold 1,000 September and 500 December, with speculative fund selling estimated at 3,000 lots.