August 17, 2007

 

CBOT Soy Review on Thursday: Tumbles lower; shedding length, premium

 

 

Chicago Board of Trade soybean futures ended sharply lower Thursday, plunging on speculative led selling tied to global economic worries and improved weather conditions for pod filling U.S. soybeans.

 

September soybeans settled 39 3/4 cents lower at US$7.99 1/4, and November soybeans finished 40 cents lower at US$8.14 1/2. September soymeal settled US$9.00 lower at US$218.80 per short tonne, and December soymeal settled US$9.60 lower at US$225.50. September soyoil ended 134 points lower at 34.50 cents a pound, and December soyoil finished 152 points lower at 35.00.

 

The improved weather outlooks for dry areas of the U.S. Midwest served as the fundamental catalyst for the market's sell-off, with broad based global fund liquidation a feature that exaggerated the day's losses, said John Kleist of Kleist Ag Consulting.

 

Speculative liquidation was a major contributor to the market's slide, as funds took equity out of the market to cover expenses in other markets, Kleist added.

 

The improved rain prospects and cooler temperatures forecasted for the Midwest are seen as ideal for crops moving through their critical yield development stage. With funds shedding length to cover expenses in other markets, futures easily continued its trend of erasing risk premium, analysts added.

 

The market sank to its lower 50-cent daily trading limits for most of the day, falling to 3-month lows, with technical pressures attracting additional sales to aide the defensive tonnee, traders said. The nearby September future absorbed a psychological blow, dropping below the US$8.00 per bushel level, traders said.

 

However, futures did manage to end well off session lows, benefiting from late position squaring and underlying end user buying, traders added.

 

Meanwhile, the DTN Meteorlogix weather forecast calls for moderate to locally heavy rain to again develop late this week in the Interstate 80 corridor area of Nebraska, Iowa and Illinois. Total rainfall through Monday, Aug. 20, could total more than four inches in eastern and northern Iowa. This rain will be a major late-season benefit to crops. In addition, temperatures will be mild, with highs in the 80s Fahrenheit, even some 70s Fahrenheit in Minnesota. The northern half of the Corn Belt has generally favorable conditions for soybean pod filling at this time.

 

A major feature of the Thursday forecast is the likelihood that the heat wave which has gripped the southern Midwest - southern Illinois, eastern and southern Missouri, southern Indiana, western Kentucky - during the past week and a half will noticeably ease during the next five to seven days, Meteorlogix forecasts. In addition, moisture from Tropical Depression Erin - now moving into south Texas - looks to stream north and northeast into the southeastern Plains through the southern Midwest, and produce the opportunity for the dry southern Midwest to receive up to an inch of rain by be too late to bring significant improvement to corn, but offers some potential benefit for late-season soybeans, Meteorlogix said.

 

In pit trades, Fimat bought 1,000 November and Rand Financial bought 500 November. Tenco sold 1,000 November, Fimat sold 1,500 November, Penson GHCO and RJ O'Brien each sold 800 November, Fortis, Rand Financial and Shatkin/Arbor each sold 500 November. Speculative fund selling was estimated near 12,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended sharply lower, as the market shed length on broad based selling pressure. Soyoil fell heavily on speculative long liquidation, succumbing to technical pressures and the outside influences of falling crude oil and Malaysian palm oil futures, analysts said.

 

Soymeal futures tumbled in unison with the rest of the complex, influenced by speculative fund sales amid global economic jitters and technical weakness, analysts said.

 

December oil share ended at 43.96% and the September crush ended at 61 1/2 cents.

 

In soymeal trades, Prudential Financial bought 800 December, MF Global bought 300 September, 300 October and 300 December, and Bunge Chicago bought 400 December. Iowa Grain sold 500 December, Bunge Chicago sold 400 December, and JP Morgan sold 800 December. Speculative fund selling was estimated at 4,000 lots, while commercial buying was pegged at 2,500 lots.

 

In soyoil trades, ADM Investor Services bought 300 March, Bunge Chicago bought 300 December, JP Morgan, Fimat and Citigroup each bought 600 December, Penson GHCO bought 800 December and UBS Securities bought 500 December. Fimat sold 1,200 December, Rand Financial sold 600 December, JP Morgan, Iowa Grain, MF Global and Shatkin/Arbor each sold 500 December, and Bunge Chicago sold 400 December. Speculative fund selling was estimated near 10,000 lots and commercial buying was pegged near 5,000 lots.