October 1, 2008

 

CBOT Soy Review on Tuesday: Tumbles on bearish USDA stocks data

 

 

An unexpected bearish surprise in U.S. Department of Agriculture 2007/08 ending stocks, coupled with uncertain macroeconomic outlooks, attracted speculative selling to send Chicago Board of Trade soybean futures tumbling to nearly 10-month lows.

 

November soybeans ended 49 cents lower at US$10.45.

 

December soymeal settled US$16.40 lower at US$285.00 a short tonne. December soyoil finished 95 points lower at 44.48 cents a pound.

 

The market was pressured throughout by speculative and technical liquidation, with end-of-month/quarter position-evening adding to the defensive tone, analysts said.

 

The November future sank to its lowest level since Dec. 17.

 

Worries about the state of the U.S. and international economies continued to keep buyers on the sidelines, with bearish fundamental data from the USDA's stocks report providing a new twist to keep sellers in command of direction, according to analysts.

 

"We have known for the past three quarters that 2007 production was underestimated, but the trade was surprised by the degree of the increase," said Dan Basse, president of AgResource Co. in Chicago. He said the trade was expecting maybe a 60-million-bushel bump in 2007 production, but a half-bushel-an-acre increase in yield and a 1.3 million jump in harvested acres have many people throwing stones at the USDA's numbers.

 

The increased supplies are expected to provide a buffer against potential yield reductions in future USDA crop reports amid widely scattered yield estimates from early harvesting.

 

However, analysts said the report will be taken with a grain of salt. While the reliability of previous average yield estimates are always open to debate, the discovery of over 1 million acres of additional harvested area is difficult to reconcile with the numerous surveys conducted by the USDA since the 2007 planting season, according to a market report from JP Morgan.

 

Quarterly soybean stocks in the fourth quarter of the 2007-08 marketing year were estimated at 205 million bushels as of Sept. 1, the USDA reported. That was well above the average analysts' estimate of 144 million bushels and the 140 million bushel carry-out in the September supply-and-demand report.

 

The 2007 soybean production was revised to 2.68 billion bushels, up 90.6 million bushels from the previous estimate. Planted area was revised up 1.11 million acres to 64.7 million acres. Harvested area is revised up 1.32 million acres to 64.1 million acres. The 2007 yield, at 41.7 bushels an acre, is up 0.5 bushel from the previous estimate, the USDA data show.

 

In pit trades, speculative fund-selling was estimated at 5,000 lots.

 

Daily trading limits for CBOT soybeans will revert back to their normal 70-cent limits for Wednesday's session.

 

SOY PRODUCTS

 

Soy product futures stumbled in step with soybeans, succumbing to speculative and technical selling pressure as well. Soymeal was weakened by commercial deliveries against the spot month, spillover from soybeans and accelerated technical selling after the most active December contract pierced through support at the psychological US$300.00 level.

 

Soyoil futures weren't immune to the speculative liquidation despite firm crude oil prices, but did manage to continue to regain product share at the expense of soymeal on spreads, analysts said.

 

Daily trading limits for CBOT soyoil will revert back to their normal 250 points for Wednesday's session.

 

December oil share ended at 43.83%, and the November/December crush ended at 71 1/4 cents.

 

Speculative fund-selling was estimated at 2,000 lots in soymeal, and 3,000 lots in soyoil.