January 7, 2009

 

CBOT Soy Review on Tuesday: Extends uptrend; beans set 3-month highs

 

 

Soybean futures on the Chicago Board of Trade continued their month-long ascent from contract lows Tuesday, rallying to 3-month highs on technical strength and bullish underlying fundamentals.

 

CBOT March soybeans finished 29 cents higher at US$10.16.

 

March soy meal settled US$2.80 higher at US$301.00 per short tonne. March soyoil finished 214 points higher at 37.31 cents per pound.

 

The markets have become a world environment and with high global protein demand, worries of potential crop declines in South America encouraged traders to add risk premium back in the market, said Tim Hannagan, analyst with Alaron in Chicago.

 

Brazil and Argentina are the world's second and third largest producers of soybeans respectively behind the U.S.

 

Traders are concerned any setback in South American production could lead to increased demand for U.S. supplies that are already projected at tight ending stock levels, Hannagan added.

 

Technically inspired buying was featured, with speculative funds picking up their buying pace after futures pushed firmly above the psychological US$10 per bushel level, traders said.

 

The bullish technical trend augmented by dryness issues in Argentina served as underpinning features. However, overbought conditions and a strengthening U.S. dollar are bearish influences limiting bullish exuberance.

 

In pit trades, speculative fund buying was estimated at 4,000 lots.

 

Forecast models have backed away from a rain event in central sections of the Argentine crop belt this week, shifting most of the rainfall into far northern sections of the belt toward the weekend, Cropcast Weather Services said in a forecast. The result is that a larger area may be left behind with substantial moisture deficits. It currently appears that approximately 40% of the corn-belt will remain prone to stress due to the lack of rainfall, Cropcast said in the forecast.

 

Private analytical firm Informa Economics on Tuesday lowered its estimate for Brazilian soybean production but kept its forecast for Argentine soybean production unchanged, traders said. The firm cut its estimate for Brazil's soybean crop 1 million tonnes to 59.5 million tonnes, traders said. It left its estimate for Argentina's soybean crop at 51.7 million tonnes, they said.

 

Meanwhile, Brazil's soybean exports should only see a slight dip in 2009 compared to 2008 despite the global economic crisis, analysts and exporters said.

 

Jose Augusto de Castro, vice president of Brazilian exporters association AEB, estimates that soybean exports will fall slightly to around 23.5 million metric tonnes in 2009 compared to 24.6 million tonnes in 2008.

 

 

SOY PRODUCTS

 

Soy product futures climbed in step with soybeans. Soyoil futures took on the upside leadership role once again, rallying to their highest level in 2-months. Speculative short covering has been a recent feature, with strength in world vegoil markets, technical momentum and the realignment of meal/oil spreads serving as the catalysts, analysts said.

 

Soymeal futures ended higher, but continued to lose product share amid the surge in soyoil values.

 

March oil share ended at 38.34% and the March crush ended at 56 1/2 cents.

 

In pit trades, speculative fund buying was estimated at 4,000 lots in soyoil and 1,000 lots in soymeal.