August 20, 2008

 

CBOT Soy Review on Tuesday: Retreats from rally on short covering

 

 

Chicago Board of Trade soybean futures settled in line with the day's early calls Tuesday, as traders backed off an "overdone" rally.

 

September soybeans settled 12 cents lower at US$12.67 a bushel. The most actively traded November soybean contract ended 13 cents lower at US$12.76, after trading a range spreading over US$1 that hit as high as US$13.41.

 

December soymeal settled US$3.20 lower at US$347.50 per short tonne. December soyoil finished 15 points lower at 53.18 cents per pound.

 

The price decline near closing "was more profit taking than anything else," a CBOT floor trader said. "The dollar and crude just followed along."

 

The U.S. dollar was down, while gold, silver and crude maintained gains.

 

Tuesday's weaker soybean close was in part a correction to Monday's rally, which hit exchange-imposed maximum trading limits and continued throughout most of Tuesday's trading day. But traders also said possible showers in the forecast and a lack of unexpected news from the U.S. Department of Agriculture's crop progress report Monday or the 2008 Pro Farmer Midwest Crop Tour are checking bullish sentiment.

 

"This market's been a roller coaster ride," said Jay Fitzgerald, an Advance Trading broker. But he added the US$13 price level is an important support level because it represents profitability, and, by extension, planting incentive to Brazil's soybean growers.

 

Fund buying was estimated at about 4,000 contracts around midday, but ended Tuesday even.

 

In Nebraska, tour scouts in one group traveling south and east of Grand Island found soybeans looking more mature than they saw Monday in South Dakota.

 

Soybean pod counts along the route have averaged from 64.8 to 1,758 per three-foot-by-three-foot area. The average was 1,225 pods.

 

Scouts said the field on the low end of that range was not well-managed.

 

On the eastern leg of the tour, scouts noted Indiana's soybean plants were much taller than they saw Monday in Ohio, but pod counts were lower than expected.

 

Friday at 10 a.m. EDT, Pro Farmer will release a crop estimate, which is based in part on tour participants' calculations.

 

In the Corn Belt, mild, dry weather is promoting corn and soybean development, but the lack of moisture is becoming a concern in parts of the eastern Corn Belt and the upper Mississippi Valley, said USDA meteorologist Brad Rippey.

 

"Some rain is probable across the Corn Belt this weekend, but heavy totals remain unlikely," said T-Storm president and meteorologist Mike Tannura. "Warmer weather occurs early next week with rain eventually to follow, but probably not until at least late next week or next weekend."

 

Tropical Fay remains unlikely to affect central U.S. agriculture, as the system is forecast to remain further east, Tannura said.

 

While China's soybeans and corn seem to be doing well, Cropcast notes "at least a risk" for some late-season dryness in western Manchuria. The dryness is lowering oil content, and a failure of near-term showers could allow "up to a third of the soybean belt to encounter some reductions in yield potential," the private weather firm said.

 

 

SOY PRODUCTS

 

Soy-product futures followed soybeans through their rally and subsequent retreat Tuesday.

 

Crush margins are improving in China and Europe, Fitzgerald said, suggesting that demand is sneaking back into the market.

 

December oil share ended at 43.35% and the November/December crush ended at 73 1/2 cents.