July 31, 2008

 

Light August soy, soymeal deliveries seen on tight stocks

 

 

Deliveries against the Chicago Board of Trade August soy and soymeal contracts on first notice day Thursday are expected to remain light, while soyoil notices are seen large, analysts said.

  

Analysts expect deliveries against the CBOT August soy contract to fall in a range of zero to 500 lots, with most analysts leaning toward a range of zero to 200 lots. Soymeal deliveries are seen between zero and 200 lots, while soyoil delivery notices are expected in a range of 2,000 to 4,000 contracts. As of 5 p.m. EDT Tuesday, 975 soy contracts, 13,171 soyoil contracts and 160 soymeal contracts were registered for delivery at CBOT approved warehouses.

  

Tight old crop inventories, with solid demand are expected to keep supplies in firm hands on first notice day, said Don Roose, president of US Commodities in West Des Moines, Iowa.

  

Commercials want ownership, and won't risk losing ownership of supplies with stocks that crushers have tight, Roose added.

  

Currently 816 receipts are registered in the Chicago area, and most of those beans are spoken for by domestic processors, leaving just 169 receipts along the river candidates to come out, a cash connected CBOT floor broker said.

  

The cash market doesn't justify taking receipts along the river, with barge freight rates up sharply, traders said. The value of soy is lower than the cost of shipping to the gulf, a cash connected trader added. This opens the door for river receipts to be put out with reduced risk of the supplies being shipped out through the rivers export channel, he said

  

The movement of spreads to a carry in recent days has put an advantage back in place for commercials to store supplies, particularly with a tight supply and demand table, Roose added

  

The August/November spread was trading at a 4 cent carry at 13:22 p.m. EDT Wednesday, and the August/November spread is trading a 7 ½ cent carry.

  

Soymeal is faced with a tight supply situation similar to soy and that should limit deliveries, analysts said. However, with receipts registered, slowing export demand and prices trading below delivery value, there is the potential for some deliveries, although light, analysts added.

  

Meanwhile, with large available soyoil inventories, slower domestic food use and declining demand from the biodiesel industry, holders of receipts are expected to put out a large quantity once again, traders said.

  

Nevertheless, soyoil deliveries remain the wild card, traders and analysts said. With 13,171 contracts registered for delivery and supplies in good hands, it's tough to figure just how many receipts could be put out, analysts said. The majority of soyoil stocks are in eastern Iowa, with 3,996 lots registered in Ackley, Iowa, and in Volga, S.D., with 3,088 lots registered.
   

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