January 24, 2007

 

CBOT Soy Review on Tuesday: Bush's speech, crude oil support prices

 

 

Chicago Board of Trade soybean futures closed higher Tuesday with support from bullish expectations that President Bush will tout alternative fuels in his State of the Union address, sources said.

 

March soybeans closed up 10 cents at US$7.27 1/4, and May soybeans ended 9 1/4 firmer at US$7.42. March soymeal ended up US$1.10 at US$210.30 per short tonne, while March soyoil closed 62 points higher at 29.93 cents a pound.

 

Talk that Bush will push for expanded ethanol and biodiesel consumption was the focus of the day, an analyst noted.

 

The State of the Union is scheduled to begin Tuesday at 9 p.m. EST.

 

"I think today's numbers are probably based more on what President Bush is going to talk about tonneight," said Jim Smitherman, president of Harvest Trading Group.

 

Bush will call Tuesday for the U.S. to reduce its usage of gasoline by 20% in the next 10 years by boosting the supply of renewable and alternative fuels and reforming fuel efficiency standards for cars, a senior White House official said.

 

Specifically, the White House will call for an increase in the size and scope of the current renewable fuel standard, or RFS, to require 35 billion gallons of renewable and alternative fuels in 2017. That's nearly five times the current target for 2012, and an amount the White House says will replace 15% of projected yearly gasoline use.

 

If Bush does tout biodiesel fuel, Smitherman said soybeans could trade higher again Wednesday on the news.

 

"I think (soybeans) can bounce on it again tomorrow, but then you'll probably have run your course," he said. "Whatever he talks about for alternative energy tonneight is going to be a long-term thing."

 

Fund buying of an estimated 3,000 soybeans contracts was another feature of the day session, sources added.

 

In pit trades, Rand Financial bought 1,000 March, while Term Commodities bought 1,100 March. Tenco bought 500 March. UBS sold 600 March. JP Morgan spread 1,000 March-July.

 

Some sources also saw concerns about wetness in South American soybean areas as positive, although others noted that growing conditions still appeared to be favorable.

 

The DTN Meteorlogix weather firm said there are concerns that Brazil's crops in Mato Grosso may be hit with soybean rust because of the persistent shower pattern but noted "there is no definite indication that such a development is occurring."

 

Brazil is expected to harvest a record-breaking 54.9 million metric tonnes of soybeans in 2006-07, according to government estimates. It is the No. 2 soy producer behind the U.S.

 

The 2006-07 soy crop is roughly 40% sold as of this week, according to a market consultant at FC Stonnee in Sao Paulo. According to a report in Tuesday's issue of local business daily, Gazeta Mercantil, agribusiness consulting firm AgRural said close to half of the 2006-07 soy crop has been sold.

 

"South American weather isn't bad so to speak, but it's getting a little bad down there," Smitherman said. "You're getting some hints that some of these production estimates might be peaking."

 

In Argentina, meanwhile, rainfall of close to one inch occurred Monday in La Pampa province in the south, and the entire central crop belt of Buenos Aires, Cordoba and Santa Fe provinces will have rains of up to one inch during the week, Meteorlogix reported.

 

"This moisture comes on the heels of some hot weather last week, and will be beneficial to both the corn and soybean crops in Argentina," the firm said.

 

 

SOY PRODUCTS

 

CBOT soy products finished higher in step with gains in soybean and on expectations about Bush's address to the nation, sources said.

 

Soyoil, in particular, was up on bullish expectations for the speech and on spillover support from gains in crude oil futures, sources added. Fund buying of an estimated 5,000 soyoil contracts was another supportive feature in the session, they noted.

 

In soyoil pit trades, Prudential bought 1,700 March. Man Financial bought 600 March, and ABN Amro bought 400 March. Fimat bought 500 May and 600 March. JP Morgan sold 500 March and 400 May. Fimat sold 300 March.

 

In soymeal pit trades, Iowa Grains bought 300 March. Funds sold an estimated 500.