October 3, 2009

 

CBOT Soy Review on Friday: Price sink to 2 1/2 month lows on big crop

 

 

Soybean futures on the Chicago Board of Trade stumbled to 2 1/2 month lows Friday, as prospects for record 2009 production and improved weather outlooks for harvests late next week attracted speculative sellers.

 

CBOT November soybeans finished 33 cents lower at US$8.85 per bushel.

 

December soymeal ended US$13.00 lower at US$267.80 per short tonne. December soyoil finished 52 points lower at 34.07 cents per pound. In pit trades, speculative fund selling was estimated at 6,000 lots in soybeans, and 1,000 lots each in soymeal and soyoil.

 

The market retreated to more sustainable price levels, as favorable yield reports and potential for the harvest to ramp up next week opened the door for the cash pipeline to be "knee-deep" in supply soon, said Gavin Maguire, director of research at eHedger in Chicago.

 

The market managed to break out of a two-week trading range, pricing in the potential for the government to reveal bigger U.S. soybean crops in next week's crop report.

 

Technically inspired selling put the final touch on the market's plunge, with pre-placed sell orders activated once the November contract pierced through psychological chart support at the US$9.00 per bushel level, analysts said.

 

The absence of any fresh bullish news and a lack of outside market support kept the anchor of record supplies weighing on prices. The delicate nature of yield losses from a frost have become minimal and with farmers looking to sell new crop supplies fresh off the combine, buyers were unwilling to step in front of the market, Maguire said.

 

The large crop outlooks overshadowed the tight availability of nearby supplies, particularly with rains expected to further delay harvest operations in southern growing areas early next week.

 

Nevertheless, the market has taken on the mindset of selling rallies until the bulk of the harvest is complete, said Maguire. Barring sharp movements in outside markets, there is more downside movement to come, with support at the US$8.80 level and then US$8.40 downside targets on technical charts, he added.

 

The T-storm Weather forecast said the central U.S. will become divided by warmth and coolness, which helps substantial rainfall to affect the northwest Corn Belt and Delta from Sunday into early next week. Showers are probable in the Corn Belt early next week, but major rainfall is less likely since it will essentially be split with better rainfall to the north and south and less most probable in central soybean areas.

 

Thereafter, a complex pattern unfolds with our suspicion remaining that wet weather should focus on the Delta and central-southern Corn Belt late next week. Rain occurs in advance of an unseasonably cold air mass that remains probable to affect the Corn Belt next weekend. In fact, most crop areas are probable to average cooler-than-usual over the next seven to 10 days, T-storm Weather forecasts.

 

Informa Economics on Friday estimated that the government will project a U.S. soybean crop of 3.383 billion bushels, traders said. The private analytical firm projected the soybean yield at 44 bushels per acre. U.S. Department of Agriculture in September projected a soybean crop of 3.245 billion bushels, with a yield of 42.3 bushels per acre.

 

 

Soy product futures tumbled in unison with soybeans. The potential for improved availability of soybeans for crushers sent negative waves filtering through the products, analysts said. Soyoil futures ended lower, but continued recapture product share on spreads, as strong underlying export demand remained a supportive influence.

 

Soymeal tumbled to their lowest levels since mid July, keeping pace with the retreat in soybeans.

 

December oil share was 38.76%, while the November/December soybean crush ended at 79 cents.