January 10, 2009

 

CBOT Soy Review on Friday: Soars; dry Argentine weather, technical buoy

 

 

A drier weather outlook for Argentina coupled with bullish technical momentum propelled Chicago Board of Trade soybean futures to 3-month highs Friday.

 

CBOT March soybeans finished 46 1/2 cents higher at US$10.36.

 

March soy meal settled US$16.20 higher at US$314.50 per short tonne. March soyoil finished 94 points higher at 36.72 cents per pound.

 

The market soared to new highs for the current uptrend, extending its recovery from a 5-month slide from all-time highs in July 2008. The market added risk premium as dry weather concerns in South America stoked fears of major drought damage to the Argentine soybean crop if the dry trend persists.

 

As the dry forecast continues for Argentina, the market has found an underpinning force to keep upside momentum flowing, said Dan Cekander, analyst with Newedge LLC in Chicago.

 

Technical buying played a key role in extending the market's upside push, with bullish traders encouraged by most active contract's ability to eclipse major moving average resistance.

 

Nevertheless, legitimate fundamental support served as the dominate issue, with outlooks for a bullish slant in Monday's U.S. Department of Agriculture crop reports adding strength, a cash connected CBOT floor broker said.

 

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

 

The DTN Meteorlogix weather forecast for central Argentina points to a declining rainfall prospect over the next five to seven days. This is a notable difference from a rather promising scenario earlier this week. Little or no significant rainfall is now indicated in forecast model guidance for the major corn and soybean areas of central Argentina. This will lead to additional stress and further declines in corn and soybean conditions.

 

In southern Brazil, Parana province - the second-largest soybean production region in Brazil - is in line for some beneficial rainfall over the next five days. However, the western portion of Rio Grande do Sul - where rainfall has been the most deficient so far this season - appears to have only limited opportunities for moisture through most of next week, Meteorlogix forecasts.

 

On tap for Monday, USDA is scheduled to release its annual crop production, supply/demand and quarterly grain stocks reports Monday at 8:30 a.m. EST (1330 GMT). There is a bias among the trade for a decrease in production and increase in exports, resulting in a tighter carryout forecast.

 

The average of analysts' estimates anticipates U.S. soybean production for the 2008-09 marketing year at 2.910 billion bushels versus 2.921 billion in the USDA's November report. The average of analysts' estimates pegs the Dec. 1 stock figure at 2.181 billion bushels from a range of 1.973 to 2.238 billion. The average of analysts' estimates peg soybean ending stocks at 186 million bushels, down 19 million from December's forecast.

 

 

SOY PRODUCTS

 

Soy product futures spiked higher in unison with soybeans. Soymeal futures were the upside leader of the products, climbing to 3 1/2 month highs on technical strength and weather issues for Argentine crops, analysts said. Technical buying was featured amid the March contract's ability to satisfy near term upside technical objectives of filling upside gaps on technical charts.

 

Soyoil soared in step with the rest of the complex, but lost product share on spreads as the weight of weakness in crude oil managed to change the meal/oil price relationship, analysts said.

 

March oil share ended at 36.99% and the March crush ended at 59 3/4 cents.

 

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