December 7, 2005

 

CBOT Soy Review on Tuesday: Lower, sets back from Monday's gains

 

 

Soybean futures on the Chicago Board of Trade stumbled lower Tuesday, setting back from Monday's gains on technically motivated speculative selling.

 

January soybeans finished 9 1/4 cents lower at US$5.64, January soymeal settled US$0.60 lower at US$174.80 a short tonne, and January soyoil ended 58 points lower at 21.33 cent a pound.

 

Without fundamental support beneath the market, it's hard to sustain a prolonged rally, said John Kleist of Kleist Agricultural Consulting.

 

The advances leading up to Monday's rally were a technical aberration, but with room for the U.S. Department of Agriculture to lower exports and raise ending stock forecasts, futures were left on shaky legs, added Kleist.

 

The average of estimates from analysts surveyed by Dow Jones Newswires pegs the 2005-06 U.S. soybean carryout at 386 million bushels, from a range of 337 million to 450 million. The USDA is scheduled to release its latest carryout projections in its supply and demand report Friday at 8:30 a.m. EST.

 

The defensive theme took shape from the outset, with technically motivated speculative selling pressuring prices, effectively erasing Monday's advances. Recent gains were seen as overdone, with ample nearby supplies and a lagging export pace bringing commodity funds back to the market as sellers.

 

A quiet news front failed to provide any incentives for buyers to offset the declines, as traders continue face bearish fundamental outlooks. Nevertheless, firm cash basis levels and the potential for additional short covering as speculative funds book end-of-the-year profits are seen as supportive features that may limit downside potential, analysts added.

 

Meanwhile, DTN Meteorlogix said Brazil's southern soybean area, from Rio Grande do Sul through Parana and Mato Grosso do Sul, had widespread rainfall of one-half to two inches on Monday, with some locally heavier amounts. These rains are moving north into Mato Grosso on Tuesday. The rains provided some very beneficial soil-moisture supplement for soybeans.

 

In Argentina, mainly dry weather will cover the corn and soybean belt this week, with variable temperatures and nothing stressful for crops. Next week, a new rain system appears on the charts for Monday and Tuesday, Meteorlogix added.

 

In pit trades, ADM Investor Services, Citigroup, Fimat, Iowa Grain and RJ O'Brien were featured sellers. Term Commodities, Man Financial, Fimat, RJ O'Brien, Refco and Tenco were principal sellers. Commodity funds were estimated sellers of 4,000 lots on the day.

 

South American soybean futures ended lower across the board. The March futures settled 7 cents higher at US$6.04.

 

 

Soy Products

 

Soymeal futures drifted lower but emerged as the strongest link in the complex. Soymeal/soyoil spreading, with soyoil down sharply allowed meal to regain product share, consolidating in Monday's trading range.

 

Soyoil futures ended sharply lower, stumbling on speculative and technical selling. The fundamental pressure of big stocks amid an active crushing pace, kept sellers in control of price direction, analysts said. The absence of support from outside markets and the lack of technical support set the stage for the price slide, despite the presence of commercial buying.

 

January oil share finished at 37.89%, and the January crush was at 48 3/4 cents.

 

In soymeal trades, Man Financial was featured buyer, with Bunge Chicago the key sellers on the sell side.

 

In soyoil trades, ADM Investor Services bought 800 January, Bunge Chicago bought 500 January and Man Financial bought 300 January. Calyon Financial, Citigroup, Fimat, Man Financial and Refco were active sellers. Commodity fund selling was estimated at 3,500 contracts while commercial firms were net buyers of 1,500 contracts.