January 3, 2008

 

CBOT Soy Review on Wednesday: Speculative buying propels prices to new highs

 

 

Chicago Board of Trade soybean futures started the 2008 calendar year on firm footing, ending Wednesday's session sharply higher on the back of speculative-led buying.

 

January soybeans settled 33 1/2 cents higher at US$12.32 1/2 and March soybeans ended 34 1/2 cents higher at US$12.48 3/4. March soymeal settled US$7.40 higher at US$344.10 per short tonne. March soyoil finished 117 points higher at 50.80 cents per pound.

 

Broad-based commodity strength fed the bullish tonnee, with new contract highs posted across the board, analysts said.

 

The funds came in as buyers to start the year, with bullish inflationary outlooks and ideas demand will outstrip supply long term, keeping speculators in a bullish mindset, said Tim Hannagan, analyst with Alaron Trading in Chicago.

 

Spillover support from new all-time highs in crude oil and metal futures provided additional support to keep prices firmly underpinned, analysts added. Lingering concerns surrounding dryness issues in Argentina was a fundamental feature adding strength to prices, traders said.

 

"There is no such thing as overbought conditions with speculative index funds a dominant player, and with world buyers of raw commodities still viewing U.S. prices cheap in relation to the rest of the world, sellers remain reluctant to stand in front of the market," Hannagan added.

 

The DTN Meteorlogix weather forecast said weather conditions during the next 10 days for Argentina's central crop belt are uncertain. Forecast models show inconsistency, with some model runs depicting drier and hotter weather, and other predictions indicating less heat and dryness. The general outlook is that Argentina's main corn, soybean and wheat areas will have periods with fairly hot conditions, and periods when there is the promise of thunderstorms. There is at least some risk to crops as a result of this uncertain outlook, Meteorlogix said.

 

In Brazil, the soybean belt continues to have few significant weather problems during the midpoint of the growing season. Periodic shower activity and warm temperatures will favor developing soybeans during the next week to 10 days, Meteorlogix forecasts.

 

In pit trades, Penson GHCO bought 500 March and ADM Investor Services bought 300 March, Fortis sold 300 March, MF Global sold 400 March and UBS Securities sold 600 March. Speculative fund buying was estimated at 5,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended sharply higher, soaring to new highs in unison with soybeans. Soyoil futures benefited from soaring outside market influences with the February crude oil futures soaring to a new all-time high of US$100.00 a barrel on an intraday basis, analysts said. Speculative-led buying was a featured attraction, but futures did manage to pare its gains on light profit taking pressure. Nevertheless, the nearby January future remained under the previous all-time high for soyoil futures at 51 cents a pound, but the March 08 future on back to the March 09 contract all traded above the previous all-time high of 51 cents set in 1973 on an intraday basis.

 

Soymeal futures rallied to new contract highs and the highest level for a nearby contract since July 2004 on continuation charts. Broad-based commodity buying coupled with the bullish influence of strong global feed demand served as catalysts to keep speculative buyers enthused, analysts said. Lingering worries heat and dryness stress to Argentine soybeans crops and the impact that will have on world soymeal supplies provided fundamental support to aide the higher tonnee, analysts added.

 

March oil share ended at 42.47% and the March crush ended at 67 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses. Speculative fund buying was estimated at 3,000 lots.

 

In soyoil trades, Tenco bought 700 March, and Citigroup bought 500 March. Bunge Chicago sold 500 March, Citigroup sold 700 March, Fimat sold 300 March, and UBS Securities sold 400 March. Speculative fund buying was estimated at 4,000 lots.