January 13, 2006

 

CBOT Soy Review on Thursday: Stumbles lower amid bearish USDA data

 

 

Soybean futures on the Chicago Board of Trade ended lower Thursday, succumbing to speculative selling pressure amid bearishly perceived output and stocks data from the U.S. Department of Agriculture.

 

March soybeans finished 12 1/2 cents lower at US$5.72; March soymeal settled US$2.70 lower at US$179.00 a short tonne; and March soyoil ended 46 points lower at 21.69 cent a pound.

 

The lack of fundamental demand to support prices in the face of higher production and inventory forecasts provided a ticklish situation for the market, enabling speculative selling to pressure prices again, said John Kleist of Kleist Ag Consulting.

 

Speculative selling was a featured attraction, with prices stumbling to 1-month lows, gapping below meaningful support at the bottom of chart gap at US$5.79. Thursday was the sixth consecutive day of soybean losses, with the current downward move extending declines to 60 1/4 cents basis March futures.

 

The bearish crop data set the stage for the losses, with diminished weather threats to Argentine crops and with the window of opportunity for U.S. export demand shrinking, traders remained focused on fundamentals.

 

The market needs to price itself into consumption, as the presence of record first-quarter inventories leaves little justification for nearby soybean prices above the US$6.00 levels, added Kleist.

 

Meanwhile, the DTN Meteorlogix forecast said increasing rainfall and cooler temperatures are on tap for Argentine growing areas during the weekend. This weather pattern will ease crop stress to developing corn and soybeans, following a round of mostly hot and dry weather during the last several weeks. Some follow-up rain is also in store during the latter half of next week, which will give an even greater boost to crop conditions. Southern Brazil soybean areas of Rio Grande do Sul and Parana have further crop stress ahead during the next seven to 10 days, Meteorlogix added.

 

Ahead of the open, USDA reported U.S. soybean production for the 2005-06 marketing year at 3.086 billion bushels versus 3.043 billion in the USDA's November report. The USDA projected 2005-06 U.S. soybean ending stocks at 505 million bushels, a result of higher output and a reduction in exports by 70 million bushels. Based on higher production forecasts, and reported usage from the domestic and export sectors, USDA reported soybean stocks as of Dec. 1 at 2.502 billion bushels, above the average trade estimate of 2.442 billion.

 

In pit trades, ADM Investor Services bought 1,000 March, FCStonnee bought 700 March, Citigroup bought 1,500 March, and Fimat bought 500 March. Calyon Financial sold 1,500 March J.P. Morgan sold 700 November, Rand Financial sold 600 March, with Citigroup, Fimat, Goldenberg Hehmeyer, RJ O'Brien and Refco Division of Man Financial each selling 500 March. Commodity fund selling was estimated between 4,000 and 5,000 lots.

 

South American soybean futures ended lower. The March futures ended 8 cents lower at US$6.2.

 

 

SOY PRODUCTS

 

Soymeal futures carved out moderate declines over the course of the day, pressured by spillover weakness from soybeans and technically motivated selling. The active March futures slipped to a new 1-month low, gapping further below meaningful resistance.

 

Soyoil futures ended weaker, extending the market's current downward move to 2-week lows. Burdensome supply outlooks coupled with bearish chart formations to pin futures in negative territory. However, good underlying commercial buying managed to limit downside potential. March oil share ended at 37.73%, and the March crush was at 60 1/2 cents.

 

In soymeal trades, buyers and sellers were scattered among various trading firms, with speculative commodity funds net sellers on the day.

 

In soyoil trades, Bunge Chicago bought 1,500 March, and Cargill and ABN Amro each bought 500 March. ABN Amro and J.P. Morgan each sold 600 March, Calyon Financial sold 1,000 March, Iowa Grain sold 700 March, Man Financial sold 800 March, and RJ O'Brien sold 400 March. Commercials were estimated buyers of 4,000 lots and fund selling was pegged at 4,000 lots.