September 19, 2009

 

CBOT Soy Review on Friday: Stumble; no freeze threat, technical selling

 

 

Soy futures on the Chicago Board of Trade settled lower Friday, stumbling late on a lack of a freeze threat to Midwest crops and technically motivated selling.

 

CBOT November soy finished 12 cents lower at US$9.41 per bushel. In pit trades, speculative fund selling was estimated at 4,000 lots in soy, and 1,000 lots each in soyoil and soymeal.

 

December soymeal ended US$8.50 lower at US$284.80. December soyoil finished 14 points higher at 35.10 cents per pound.

 

The absence of a threat of freezing temperatures that would shut down the growing season for immature soy crops across the Midwest served as the catalyst to attract sellers to the market, analysts said.

 

The weather, if verified, opens the door for many crops to reach the record size potential projected by the government and many private forecasters. A strengthening U.S. dollar was another bearish feature that weighed on commodity markets in general.

 

However, the market remains in a transition period, where tight old crop carryover inventories and strong export demand continue to generate price support. "The cash pipeline is very depleted and end users and exporters are waiting on new crop supplies," said Dan Basse, president AgResource Co.

 

The tightness of supplies is reflected in firmer cash basis levels at the Gulf of Mexico, as strong export demand remains an underpinning feature, Basse said. "Rains in the U.S. Delta have stalled harvest activity this week, at a time when it's important that we start digging into new crop supplies," he added.

 

Tight pipeline supplies and concerns about harvest delays in the Delta provided support, but without a weather threat to record Midwest crops, traders were seemingly more comfortable trimming their risk exposure heading into the weekend.

 

Technical selling added to the mix, with the inability of the most-active November contract to challenge overhead chart resistance sending sell signals to traders.

 

The DTN Meteorlogix weather forecast for the Midwest calls for mild temperatures and no frost in the region during the next week to 10 days.

 

Meanwhile, moderate to locally heavy showers in the Delta will continue for another day or two before diminishing Sunday and Monday. However, there is at least some risk for more heavy rain next week. Rain will likely cause delays to the early soy harvest.

 

In demand news, private exporters reported to the U.S. Department of Agriculture export sales of 182,000 metric tonnes of soy for delivery to China during the 2009/2010 marketing year, the USDA said Friday.

 

 

Soy Products

 

Soy product futures ended mixed, with adjustments in the meal/oil spread relationship a featured attraction. Soyoil managed to carve out some product share, buoyed by supportive talk of a potential pick up in U.S. biodiesel exports to the European Union. "There is talk in the market that there is a loophole in the E.U. tariff on biodiesel imports, and that managed to fuel momentum that U.S. exporters will have an opportunity to ship biodiesel to the E.U. as long as the biofuel does not make up more than 19% of the diesel/biodiesel mixture," a CBOT floor analyst said. The biodiesel was a new wrinkle that underpinned soyoil on spreads, analysts said. Soyoil is the primary feedstock for biodiesel production in the U.S.

 

December oil share was 38.03%, while the November/December soy crush ended at 71 3/4 cents.