November 17, 2005

 

CBOT Soy Review on Wednesday: Tumbles to 2 1/2-week lows on Spec sales

 

 

Soybean futures on the Chicago Board of Trade ended sharply lower Wednesday, tumbling to 2 1/2-week lows, as bearish underlying fundamentals and technical weakness uncorked speculative fund selling, traders said.

 

January soybeans finished 15 1/2 cents lower at US$5.76 3/4, December soymeal settled US$6.80 lower at US$173.40 a short tonne, and December soyoil ended 15 points lower at 22.19 cent a pound.

 

Growing concerns that the bird flu problem in China may be worse than anticipated served as the bearish theme to keep prices on the defensive, with prices falling back in the middle of its recent price range amid the lack of fundamental justification for January futures to be above US$6.00 per bushel, said Dan Basse, president of AgResource in Chicago.

 

Speculative selling was a featured attraction, with commodity funds estimated sellers of 8,000 contracts on the day.

 

News that unofficial Chinese news site Boxun.com had reported numerous human deaths related to avian influenza (bird flu) as well as human to human spread of the virus in China sparked bearish sentiment in the market. This report coupled with ample nearby U.S. soybean supplies, lagging export demand and the absence of a South American weather threat provided the fundamental means to keep buyers on the sidelines.

 

Selling pressure accelerated once the active January future penetrated meaningful support levels, with sell-stop orders activated during the market's slide. This was consistent, until aggressive selling was exhausted as active contracts neared recent lows.

 

In pit trades, Calyon Financial, Citigroup, RJ O'Brien, O'Connor and Refco were featured sellers.

 

On tap for Thursday, U.S. Department of Agriculture is scheduled to release its weekly export sales report 7:30 a.m. CST (1330 GMT). Analysts surveyed by Dow Jones Newswires anticipate soybean commitments between 500,000 and 700,000 metric tonnes, soymeal sales between 100,000 and 150,000 tonnes, and soyoil sales between 2,000 and 7,000 tonnes.

 

South American soybean futures ended lower across the board. The March futures settled 16 cents lower at US$6.08.

 

 

SOY PRODUCTS

 

Soymeal futures tumbled to one-week lows Wednesday, pressured by speculative fund selling. The fundamental pressure associated with concerns over the potential for reduced feed demand from Asia amid bird flu worries and growing competition from alternative protein feed sources served as the catalyst to entice funds into expanding their short positions in the market, said a cash-connected CBOT broker.

 

Commodity fund selling was estimated at 6,000 contracts, with sell-stop orders triggered once futures penetrated key support levels resting beneath the market. Technical selling played a key role in the declines, with market bears encouraged by the December contract's ability to settle below its 50-day moving average - US$173.90.

 

Soyoil futures ended lower but managed to regain some product share at the expense of soymeal. Speculative selling was evident in the market, but with good support seen near the 22.00-cent-per-pound level basis December and trade talk of oil share percentage closing in on a near-term low, downside pressure was limited, analysts said.

 

December oil share ended at 39.02%, and the December/January crush was at 42 1/2 cents.

 

In soymeal trades, Cargill, Bunge Chicago, ABN Amro, Calyon Financial, Citigroup, Fimat, Goldenberg Hehmeyer, Man Financial and RJ O'Brien were featured sellers.

 

In soyoil trades, Bunge Chicago, Cargill, Term Commodities and ABN Amro were principal buyers. ABN Amro, Calyon Financial, Iowa Grain and RJ O'Brien were featured sellers. Commodity fund selling was estimated at 1,000 lots.