September 13, 2006

 

CBOT Soy Review on Tuesday: Sets new lows on bearish fundamentals

 

 

Chicago Board of Trade soybean futures ended lower Tuesday, establishing new contract lows as the combination of bearish underlying fundamentals and spillover pressure from other grains attracted speculative selling.

 

September soybeans ended 4 3/4 cents lower at US$5.27 1/4 and November soybeans finished 6 cents lower at US$5.38 1/2. December soymeal settled US$1.90 lower at US$158.90 a short tonne, while December soyoil ended 17 points lower at 24.75 cents a pound.

 

The inherent fundamental weakness of the market is not providing any incentive for traders to get bullish, and once futures lost outside support, speculative sellers targeted contract lows, said John Kleist, analyst with Top Third Ag Marketing in Chicago.

 

Broad-based commodity weakness helped extend the losses, firmly planting futures in negative territory, as futures satisfied near-term downside technical objectives. The path of least resistance is down based on soybeans' fundamental makeup, as the second-largest projected soybean crop on record coupled with ideas that the crop could get larger in subsequent production reports set the table for the defensive tonnee, traders added.

 

The market initially attempted to hold up individually, but without the psychological support of higher corn, wheat and outside market prices, futures easily succumbed to speculative selling pressures, said Kleist. Talk of lower prices inspiring consumption managed to "cushion the declines" as the market quietly carved out new lows, he added.

 

Ahead of the open, the U.S. Department of Agriculture pegged 2006-07 soybean production at 3.093 billion bushels, on target with the average of trade estimates, and up 165 million from August. Soybean yield is projected at 41.8 bushels per acre, up 2.2 bushels from the August projection of 39.6 bushels an acre and on par with the average of trade estimates at 41.9.

 

USDA said the higher production estimate if realized would be the second highest on record, and attributed it to improved crop conditions due to near- or above-normal moisture in August across the Midwest crop belt.

 

In pit trades, Calyon Financial and Man Financial each bought 500 November, and ADM Investor Services bought 400 November. Man Financial sold 1,000 November, Rand Financial sold 2,500 November and Fimat sold 400 November.

 

Day session volume for soybeans on the e-CBOT platform totaled 18,669 contracts.

 

South American soybean futures ended lower, with the November futures settling 6 1/2 cents lower at US$5.88.

 

 

SOY PRODUCTS

 

Soy product futures stumbled lower, pressured by speculative selling amid commodity wide weakness and fundamental pressure. Soymeal futures sank to new contract lows, in tune with declines in soybeans. Weakness in other commodities, and increased ending stocks projections helped attract speculative selling, analysts said. Light underlying demand support managed to limit downside potential, analysts added.

 

Soyoil futures fell to multi-month lows once again, pressured by weakness in the energy sector and bearish supply forecasts from the USDA's supply and demand report. The lack of support from outside markets and signs that soyoil continues to build stocks served as the catalysts to spark speculative selling pressure, traders said.

 

September oil share ended at 43.68%, and the September crush ended at 82 1/2 cents.

 

In soymeal trades, buyers and sellers were widely scattered among various commission houses.

 

In soyoil trades, Bunge Chicago bought 600 October and 1,000 December. Bunge Chicago and Man Financial each sold 500 December, Iowa Grain sold 600 December and Fimat sold 1,000 December. Speculative funds were estimated sellers of between 2,000 and 3,000 contracts.