December 10, 2009

 

CBOT Soy Review on Wednesday: Backpedals on profit-taking pressure

 

 

Chicago Board of Trade soy futures stumbled Wednesday, backpedaling on speculative profit-taking.

 

CBOT January soy ended 15 1/2 cents lower at US$10.28 1/2, and March soy settled 15 cents lower at US$10.37 3/4.

 

Speculative funds were estimated sellers of 7,000 lots in soy, 2,000 lots in soyoil and 3,000 lots in soymeal.

 

The market lacked support to sustain its early price bounce, as once advances stalled, traders quickly took some profits off the table, said Victor Lespinasse, analyst with Grainanalyst.com.

 

The partial recovery in the U.S. dollar index from initial lows and broad-based declines seen across crude oil and metal futures added another bearish twist to entice traders into covering some risky long positions in the market, Lespinasse said.

 

Technically inspired selling was featured in the market's retreat as well. After several attempts to rally futures in the past week above recent highs were met with selling pressure, aggressive buyers quickly lost confidence in the market, a CBOT floor analyst said.

 

"Once outside macro markets rolled over and technical weakness emerged, selling pressure accelerated as traders consolidated positions ahead of Thursday's supply and demand report," he added.

 

However, strong underlying demand and outlooks for a tighter U.S. balance sheet in Thursday's supply/demand report provided support to limit downside risks.

 

The U.S. Department of Agriculture is scheduled to release its December supply and demand report Thursday at 8:30 a.m. EST. The average estimate of analysts surveyed by Dow Jones Newswires pegs U.S. soy 09/10 ending stocks at 235 million bushels, down from the November USDA forecast of 270 million bushels.

 

USDA is also scheduled to release its weekly export sales report at 8:30 a.m. EST on Thursday. Analysts surveyed by Dow Jones Newswires estimate soy sales for the week ended Dec. 3 to be in the range of 600,000 to 900,000 metric tonnes. Soymeal export sales are seen between 100,000 and 175,000 tonnes, while soyoil sales are pegged between 5,000 and 50,000 tonnes.

 

 

Soy Products

 

Soy product futures ended lower across the board, succumbing to speculative-led selling. Soyoil futures tumbled to three-week lows, under pressure from a sharp drop in crude oil futures, technical weakness and pressure from trader speculation of a possible change in Argentina's export tax on soyoil, traders said.

 

Adding fuel to the bearish fire was active commercial buying of January soyoil put options and technical selling emerging once the January contract slipped below the psychological 40 cent per pound level.

 

Despite the talk of an Argentine tax change on soyoil exports at CBOT, Argentine traders are incredulous. "I haven't heard anything about this and it would be really strange for them to do something like that," says brokerage Panagricola S.A. vice president Ricardo Baccarin. However, the head of the national tax agency, or AFIP, is holding a press conference Wednesday afternoon where he is expected to make an announcement concerning the farming emergency faced in areas which suffered a severe drought this year.

 

Soymeal futures ended lower, retreating in step with soy. Soymeal did manage to gain product share value on meal/oil spreading.

 

December soymeal ended US$2.40 lower at US$314.20 per short tonne, while March soymeal settled US$2.50 lower at US$305.60. December soyoil finished 121 points lower at 38.90 cents per pound, while March soyoil ended 122 points lower at 39.27.

 

January oil share was 39.18 while the January soy crush ended at 75 3/4 cents.