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Soybean Futures Plunge on Higher-Than-Expected Supply and Lower Usage

Strategic Insights

— 2 min read

Soybean futures plummeted Monday on the Chicago Board of Trade, with the March contract falling 70 cents to $9.66 and its daily trading limit. The decline was attributed to the U.S. Department of Agriculture's report on higher-than-expected supply and lower usage, contradicting expectations of lower production and ending stock forecasts. Analysts point to the USDA's data showing increased production, stocks, and private export sales to China as the primary causes of the market's correction.

Key Takeaways:

  • The U.S. Department of Agriculture's report on higher-than-expected soybean supply and lower usage led to a 70-cent decline in the March soybean contract to $9.66 and its daily trading limit.
  • Analyst Mario Balletto attributed the plunge to the USDA's data, which showed increased production, stocks, and private export sales to China.
  • A total of 1,055 contracts were offered in the March soybean contract at the limit down level on the electronic platform.
  • March soy meal settled $20.00 lower at $294.50 per short ton, and March soyoil finished 231 points lower at 34.41 cents per pound, amidst speculation fund selling estimated at 5,000 lots.
  • Technical selling and spillover weakness from limit-down corn futures, sharp declines in crude oil, and strength in the U.S. dollar contributed to the declines in soybean futures.
  • Analysts view South American weather over the next 30 to 45 days as the true determinant of near-term price direction, with dryness in Argentina and China remaining a significant factor in the market.
  • The USDA estimated 2008-09 U.S. soybean ending stocks at 225 million bushels, well above the average of 186 million bushels from a Dow Jones Newswires survey estimate.
  • USDA estimated 2008 soybean production at 2.959 billion bushels, above the average of survey estimates at 2.910 billion, with U.S. soybean stocks as of Dec. 1 reported at 2.276 billion bushels, above the average of survey estimates at 2.181 billion.

Statistics:

  • 70 cents: decline in the March soybean contract to $9.66 and its daily trading limit.
  • 6.5% to 8%: range of value of soybeans fell from Friday's close.
  • $294.50: price of March soy meal, $20.00 lower from the previous day.
  • 34.41 cents per pound: price of March soyoil, 231 points lower from the previous day.
  • 5,000 lots: estimated speculative fund selling in soybeans.
  • 1,055 contracts: offered in the March soybean contract at the limit down level on the electronic platform.
  • 2008-09: USDA estimated U.S. soybean ending stocks at 225 million bushels.
  • 186 million bushels: average of Dow Jones Newswires survey estimates for 2008-09 U.S. soybean ending stocks.
  • 2.959 billion: estimated 2008 soybean production.
  • 2.910 billion: average of survey estimates for 2008 soybean production.
  • 2.276 billion: U.S. soybean stocks as of Dec. 1.
  • 2.181 billion: average of survey estimates for U.S. soybean stocks as of Dec. 1.

Sources:

  • Dow Jones Commodities News via Comtex - Chicago, Jan 12, 2009
  • Andrew Johnson Jr., Dow Jones Newswires; 312-347-4604; andrew.johnsonjr@dowjones.com
  • Dow Jones Newswires 01-12-09 1544ET
  • Copyright (c) 2009 Dow Jones & Company, Inc.

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