July, August Soybean Futures Post Gains : Prices Mixed Otherwise as Effects of Liquidation Order Debated

Traders were split Tuesday about the impact of a Chicago Board of Trade order requiring liquidation of large positions in the July soybean futures contract, as the first of two deadlines under the order passed.

Speculation among traders was that some prices rose Tuesday partly because major market players may have been rolling over contracts for July delivery of soybeans into August in an attempt to deal with the board’s order.

Soybeans settled 9.25 cents lower to 18 cents higher Tuesday at the board of trade, the world’s largest exchange for the commodity used in products from tofu and cooking oil to cosmetics.

The July contract, which settled at $6.955 a bushel, and the August contract were the only two to close higher on the day.

The emergency directive, issued last Tuesday by the exchange’s board of directors, was widely interpreted in the market as a reaction to the large soybean position built by Italian agribusiness giant Ferruzzi S.p.A.

Amid rumors that Ferruzzi was seeking to corner the market and artificially boost prices, the board ordered all traders to reduce their positions in the July contract to 3 million bushels by the close of trading Tuesday and to 1 million bushels when the contract goes off the board Thursday.

“Supply tightness aside, there are two reasons the closing prices were interesting,” said a trader who spoke on the condition of anonymity.

“The first is that the volume in July beans was very thin because nobody wants to get involved. That might explain the healthy price climb there.

“As for August, Ferruzzi may simply have rolled their July contracts into the next month,” he said.

Ferruzzi, which failed in court last week to block the board’s order, has denied that it attempted to illegally corner the market.

“And although we don’t agree with the order, we are in full compliance as of today,” Ferruzzi spokesman Gene Donati said in a telephone interview.

Ferruzzi has said it accumulated contracts for delivery of as much as 24 million bushels of soybeans--when only about half that many soybeans actually were available for sellers to honor commitments--to meet export business commitments and ensure a steady flow of product for its processing plants.

The company indicated last week that it would file a second lawsuit seeking to recover what it claims are financial losses resulting from the exchange directive. Donati said a filing date had not been decided.