January 4, 2006

 

CBOT Soy Review on Tuesday: Up on tech buying, argentina weather

 

 

Soybean futures on the Chicago Board of Trade ended firm Tuesday, rallying to a new high for the current move, buoyed by a technical-buying push and concerns over heat and dryness in soybean-growing areas in Argentina, traders said.

 

March soybeans finished 15 cents higher at US$6.28 1/2, March soymeal settled US$1.40 higher at US$197.70 a short tonne, and March soyoil ended 134 points higher at 23.24 cent a pound.

 

The strength of speculative fund buying was the catalyst for the strong gains, with technical momentum following the market's breakout to the upside on charts keeping bullish momentum flowing, said Jack Scoville, commodity analyst with the Price Group in Chicago.

 

Heat and dryness in Argentina's soybean-growing regions, with forecasts calling for temperatures to climb toward 100 degrees Fahrenheit, was a fundamental feature with talk of China buying U.S. supplies providing support as well.

 

The firm tonnee was present from the outset, with advances accelerating once the active March contract pierced through resistance at recent highs and the 200-day moving average near US$6.30 per bushel. Outlooks for commodity index funds to reallocate investment money into grains managed to keep sellers at bay, as participants were unwilling to stand in front of a bullish train steamrolling down the tracks, said a CBOT commission house broker.

 

This was consistent until late farmer selling and end-of-day position squaring surfaced to trim advances on the close, traders added.

 

Meanwhile, the DTN Meteorlogix forecast calls for dry weather to dominate the central corn and soybean belt of Argentina through the end of this week. High temperatures will be well into the 90s Fahrenheit, possibly reaching 100 degrees by Thursday. Over the coming weekend, temperatures will range from 93 to 102 Fahrenheit. The next notable chance of showers does not show up in the forecast until next Monday, Meteorlogix added.

 

In southern Brazil (Rio Grande do Sul and Parana), scattered showers are seen through Thursday. Going into the end of the week, crop weather conditions will decline significantly, with dry weather set to develop through the weekend, along with hot temperatures. Highs could reach 95-98 degrees Fahrenheit in Rio Grande do Sul due to the development of an upper-atmosphere ridge of high pressure in southern Brazil, Meteorlogix said.

 

In pit trades, commodity fund buying was estimated at 6,000 contracts, with Fimat, Goldenberg Hehmeyer, Man Financial, Refco and Shatkin/Arbor key buyers.

 

South American soybean futures finished firm. The March futures ended 11 cents higher at US$6.46.

 

 

SOY PRODUCTS

 

Soyoil futures surged to nearly two-month highs, steamrolling through overhead resistance levels on speculative short covering and fresh buying interest. The funds had been buying soyoil over the past few sessions, correcting the soymeal/soyoil spread relationship, as the large buildup of short positions in the market set the stage for a major correction, analysts said.

 

Anticipation of index fund buying in soyoil helped send shorts running for cover, as near-term chart trends have changed to an upward bias, analysts added. Since setting a 10-month low last week, the March contract has rallied more than 230 points. Strong commercial stopping of deliveries provided underlying support.

 

Soymeal futures ended higher but emerged as the weakest link in the soy complex, as the correction of the soymeal/soyoil spread relationship and the absence of aggressive fund buying limited upside movement, analysts said. March oil share climbed to 37.02%, and the March crush was at 64 cents.

 

In soymeal trades, buyers were scattered across various commercial and commission houses, with Bunge Chicago, ABN Amro, JP Morgan and Tenco featured sellers.

 

In soyoil trades, Calyon Financial, RJ O'Brien, Rand Financial and Refco were key buyers. Commodity fund buying was estimated between 5,000 and 6,000 contracts.