December 2, 2004

 

 

CBOT Soy Review On Wednesday: Market Slips As Key Resistance Holds

 

Soybean futures at the Chicago Board of Trade posted sizable losses Wednesday on mostly speculative selling after failing to take out key resistance points, traders said.

 

January soybeans settled 6 3/4 cents lower at $5.28 a bushel, January soymeal finished $0.70 lower at $154.90 a short ton, and January soyoil ended 24 points lower at 20.46c a pound.

 

Fresh bullish incentives to carry prices higher in the midst of the light volume failed to appear, Chicago traders said. Without any major supportive news to shake the market out of its holiday trading mode, prices were left to explore further into negative territory.

 

"The (January soybean) chart looks bad. We're probably headed down to test the low of $5.03," said Jim Smitherman, president of Harvest Trading Group in Dallas, Texas.

 

Just over three weeks ago, the January contract made a contract low at $5.03 before rallying to $5.62 last week. If the overall fundamentals of the market remain bearish, Smitherman said, the low could be seen by as early as next week.

 

The market did start the session off to the upside with support from a firm overnight close on the e-CBOT and on renewed talk of Asian soybean rust in the U.S. sparked by the U.S. Department of Agriculture's confirmation of rust in Missouri Tuesday. More recently, rust now is rumored to be in Tennessee, but the talk has yet to be confirmed.

 

The positive momentum, though, was not enough to take out Tuesday's session high of $5.40 1/2.

 

"The failure to take out yesterday's (Tuesday's) high doomed it from the start," Smitherman said. "When we took out yesterday's low, that added to the selling."

 

The market is also caught in a very strong seasonal downtrend that lasts through the start of next year, Smitherman said.

 

The rising cost of freight rates is also a major damper on an industry that is trying to market a record-large U.S. soybean crop.

 

"These high freight rates are really starting to impact world trade. We're getting priced out of Asia. It's getting too expensive," a Chicago agricultural commodities trader said.

 

The cost of sending a cargo of soybeans to the Far East from the U.S. Gulf has now risen to staggering levels of more than $70.00 a metric ton for December shipment. "Everyone thinks they're going higher," a broker for a commercial grain trading company said.

 

There is now talk of China "washing out," or canceling, previously purchased cargoes of U.S. soybeans at the Gulf due to high freight rates and very weak crush margins in China, traders said. The rumors, though, have not been confirmed. However, the January/March spread fell to a 3 1/2-cent inverse, down from 1 1/4 cents on Tuesday. And at the port in New Orleans, basis rose 1 cent Wednesday to 55 cents over the CBOT January contract for December shipment. But one month ago, basis was as high as 67 cents.

 

Meanwhile, for the U.S. Department of Agriculture's weekly export sales report due out Thursday, soybean export inspections for the 13th week in the marketing year are expected to range from 600,000 to 800,000 metric tons.

 

On the CBOT trading floor, Cargill bought 200 January futures, Rand Financial bought 300 January, and Man Financial bought 400 January. R.J. O'Brien sold 700 January, Refco sold 600 January, DT Trading sold 300 January, and Kottke sold 200 March.

 

Soy Products

 

Soyoil futures ended lower across the board with some traders blaming the oil market for weighing on the price of soybeans. The January soyoil contract fell 1.16%, taking January oil share to 39.77%, down from 39.95% on Tuesday. For Thursday's export sales report, soyoil sales are seen from 5,000 to 10,000 tons.

 

In the soyoil trading pit, Cargill bought 200 January futures, Produce Grain bought 100 March and 200 January, R.J. O'Brien sold 600 January, and Rand Financial sold 200 January. Man Financial spread 1,000 March/January.

 

Soymeal futures ended just under unchanged after trading firmer earlier in the day in light activity. The January contract lost 0.45% of its value, and the December/January crush spread rose to 34 1/4 cents, up from 31 1/4 cents. Soymeal export sales on Thursday are expected to be from 50,000 to 150,000 tons.

 

CBOT soymeal trades include Calyon Financial buying 500 January futures, Iowa Grain buying 200 January, and Tenco buying 400 January and 100 July. Fimat sold 200 March, R.J. O'Brien sold 500 March, and Refco sold 200 March and 1,500 January.