January 16, 2009

 

CBOT Soy Review on Thursday: Holds moderated gains on weather, exports

 

 

Chicago Board of Trade soybean futures rose Thursday, supported by continued strength in export sales and concerns about the condition of the South American crop.

 

March soybean contracts finished up 23 cents a bushel to close at US$9.94 1/2, off day's US$10.24 high. The contract traded a 50-cent range. May soybeans added 23 cents to close at US$10.03 1/4. It spread a 47-cent range, topping at US$10.30.

 

Midday estimates pegged speculative fund buying at 5,000soybean contracts.

 

The day's gains moderated after an initial spike following a private analyst released estimated cutting Brazil's projected soybean output by 3 million tonnes.

 

After traveling for two-and-a-half weeks through the major Brazilian soybean-producing states of Mato Grosso, Mato Grosso do Sul, and Parana, Soybean and Corn Analyzer analyst Michael Cordonnier cut his projected soybean production for the country by 3 million tonnes.

 

"The situation is still evolving and these estimates may still move lower in coming weeks," said Cordonnier's report.

 

"Soybean yields can be affected more so in Brazil than they can be affected here in the U.S. due to the very high temperatures, strong sunlight, and lower water holding capacity in many Brazilian soils," Cordonnier said. "Unless you have been there, it is hard to describe just how intense the sun can be when it is directly overhead as it is now in southern Brazil. Just a few days without rain and soybeans will start to wilt under these intense conditions."

 

Cordonnier called the damage to the soybeans in Parana "irreversible" and rated most of the Parana soybean quality as "poor to very poor.... some of the worst soybeans I have ever seen in Brazil."

 

After the initial price spike, traders looked at the report with a certain degree of skepticism.

 

"I'd give him 20 cents on what he said, but not 50," one CBOT floor trader said.

 

"The whole crop is not totally trashed [and] most commercials are telling us the same thing."

 

The U.S soybean market is operating in a range of US$9.75-US$10.25, he said.

 

Outside financial markets and crude oil are putting a cap on rallies and, he added, farmers should reward whatever rallies do emerge with sales.

 

 

Soy Products

 

The CBOT soy complex finished on the upside Thursday, inline with gains logged in soybeans futures.

 

"Drought-like conditions in Argentina, the world's largest soy meal exported and third-largest soy oil exporter, continues adding some bullish support for soy meal and oil futures," says Doane Agricultural Services.

 

Speculative funds bought an estimated 1,000 soymeal and soyoil lots, respectively, according to midday estimates.

 

March oil share ended at 36.06% and the March crush ended at 55 cents.