July 16, 2008

 

CBOT Soy Review on Tuesday: Drops on speculative sales, crude oil plunge

 

 

Chicago Board of Trade soybean futures ended sharply lower Tuesday, pressured by broad-based speculative selling linked to a large drop in crude oil prices and favorable near-term weather.

 

August soybeans settled 40 cents lower at US$15.42 and November soybeans ended 43 cents lower at US$15.16.

 

December soymeal settled US$13.90 lower at US$401.30 per short tonne. December soyoil finished 76 points lower at 64.44 cents per pound.

 

The absence of fresh fundamental news to feed bullish appetites kept buyers cautious, and once crude oil futures tumbled, speculative selling quickly filtered through the CBOT grain and oilseed complex, analysts said.

 

Midwest weather is seen as favorable for crop development, with seasonably warm temperatures and above-normal precipitation forecasted into next week weighing on prices as well, analysts added.

 

Active contracts stumbled to one-week lows, with technical pressure helping to accelerate the declines, traders said. Nevertheless, downside pressure was limited, as the overall fundamental outlook of the market remains bullish, traders added.

 

A tight supply and demand balance sheet will keep attention on the development of late-planted crops, and any shift from benign conditions to a pattern that threatens yields is seen buoying prices as well as encouraging traders to add risk premium back in, a CBOT floor analyst says.

 

However, without a fresh dose of bullish news, the market will struggle to sustain price gains near record levels, he added.

 

The DTN Meteorlogix weather forecast said the next few days continue to bring at least scattered rains to the Midwest soybean belt. The forecast maintains periodic rainfall through the balance of the week. The most rain will focus on northern Midwest crop areas, with up to 2 1/2 inches of rainfall in Minnesota and Wisconsin. In general, moisture will be favorable for crop development, Meteorlogix said.

 

Hot weather over the western Midwest will be fairly short-lived due to thunderstorms during the next few days. The eastern Midwest may see a little more of an extended drier, warmer spell but not enough to significantly affect crop conditions, Meteorlogix added.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative fund selling estimated at 4,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures tumbled in step with soybeans, succumbing to broad- based sales throughout the complex. Outside market influences and the need to keep spread relationships inline, forced soyoil and soymeal drop in unison with soybeans, analysts said. Soyoil was influenced by sharp declines in crude oil, but managed to gain product share of the unwinding of meal/oil spreads and commercial buying on breaks, traders added.

 

December oil share ended at 44.53% and the November/December crush ended at 75 3/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with speculative fund selling estimated at 2,000 lots.

 

In soyoil trades, buyers and sellers were scattered among various commission houses, with speculative fund selling estimated at 2,000 lots, and commercial buying estimated at 2,000 lots.