October 3, 2007

 

CBOT Soy Review on Tuesday: Finishes sharply lower in correction

 

 

Chicago Board of Trade soybean futures sank Tuesday in a correction from a recent rally to new contract highs and amid spillover pressure from other commodities markets, traders said.

 

November soybeans closed down 47 3/4 cents at US$9.43 3/4, the contract's lowest close since Sept. 13. December soymeal ended US$16.10 lower at US$268.70, and December soyoil settled 98 points lower at 38.65 cents per pound.

 

CBOT soybeans last week climbed to fresh contract highs and were due to see a profit-taking setback, traders said. The CBOT grains and soy complex, in general, also tumbled on fund liquidation, weakness in the metals markets and the bearish influence of a firmer U.S. dollar, they said.

 

Commodity funds sold an estimated 8,000 contracts. In pit trades, Goldenberg Hehmeyer, RJ O'Brien and UBS each sold 1,000 November. Man Financial sold 600 November, and Fortis sold 500 November. Fimat bought 700 November, and ADM bought 500 November.

 

The soy complex will likely come under pressure from fund selling again Wednesday, said Tim Hannagan, analyst for Alaron Trading in Chicago.

 

"There's a lot of room to pull back," he said.

 

Commodity brokerage firm FC Stonnee on Monday afternoon estimated 2007 U.S. soybean production at 2.722 billion bushels with a yield of 43 bushels per acre. In September, the U.S. Department of Agriculture pegged 2007 soybean production at 2.619 billion bushels with a yield of 41.4 bushels per acre.

 

The new, larger estimate was bearish and weighed on prices a bit, an analyst said. The USDA will release its updated projection Oct. 12.

 

A steady U.S. harvest progress also contributed to a weaker tonnee for the soy complex, a trader said.

 

The USDA said Monday afternoon that 29% of the soybean crop was harvested as of Sunday, up from 18% last year and above the five-year average of 24%. The USDA said 88% of the soybean crop was dropping leaves, compared to 85% a year ago and the five-year average of 84%.

 

Still, combines returning from corn and soybean fields in portions of northern Iowa are carrying large quantities of low-quality, weather-damaged grain, industry members said. Corn and soybeans, which had already been under significant drought stress, were then subjected to torrential August rains, and then languished in mud or standing water for weeks prior to harvest, they said.

 

Private weather firm DTN Meteorlogix said some harvest delays are possible this week as thundershowers are expected to produce up to one inch of rain in the western Midwest and an additional 3/4 inch of an inch precipitation in the eastern Midwest. The rains follow showers that brought up to one inch in the eastern Midwest on Monday.

 

"This turn to wetter conditions may lead to harvest delays over the western and northern Midwest," Meteorlogix said. "However, harvest progress is doing well."

 

In Brazil, hot, dry weather is expected to continue over Mato Grosso and Mato Grosso do Sul for at least another seven days, Meteorlogix said. Temperatures from the upper 90s Fahrenheit to the low 100s should persist.

 

The forecasts are supportive for the soybean market as any significant soybean planting cannot take place until rains arrive, analysts said.

 

 

SOY PRODUCTS

 

Profit-taking and spillover selling from CBOT soybeans dragged down soy product futures, traders said. Lower palm oil values overnight also contributed to weakness during the day session they said.

 

Commodity funds sold an estimated 3,000 soymeal contracts and 4,000 soyoil contracts. In pit trades, Tenco sold 600 December soymeal, and Rand Financial sold 1,000 December soyoil.