January 28, 2006

 

CBOT Soy Review on Friday: Ends strongly; technicals, weather buoy

 

 

Soybean futures on the Chicago Board of Trade ended the week strongly, rallying to nearly three-week highs Friday, buoyed by a technical buying push and concerns over heat and dryness in soybean-growing areas in Argentina, traders said.

 

March soybeans finished 16 1/4 cents higher at US$5.89 1/4, March soymeal settled US$6.10 higher at US$186.40 a short tonne, and March soyoil ended 54 points higher at 22.05 cent a pound. For the week, March soybeans are up 21 1/4 cents, March soymeal gained US$7.00 and March soyoil rallied 77 points.

 

Technically inspired buying helped propel futures to three-week highs, with a late speculative push uncovering pre-placed buy stops, as the March contract breached meaningful overhead resistance at its 20-day and 50-day moving averages, analysts said.

 

The strength of speculative fund buying was the catalyst for the strong gains, with late spillover momentum from soymeal cementing the market's strong finish.

 

Heat and dryness in Argentina's soybean-growing regions, with forecasts calling for temperatures to climb toward 100 degrees Fahrenheit during the weekend, was a fundamental feature that supported prices. Conflicting weather forecasts for the region - with some forecasters calling for an extended period of heat and dryness and others projecting the pattern breaking up early next week - provided enough uncertainty to force the market to add risk premium, said a CBOT commission house broker.

 

The firm tonnee was present from the outset, with follow-through buying from Thursday's firm technical close and lingering thoughts of February 2005 - when fund buying and dry South American weather combined to spark a strong rally - enticed traders to cover short positions.

 

This was consistent, aside from some midsession farmer selling that briefly trimmed advances.

 

Meanwhile, the DTN Meteorlogix forecast said isolated showers were in store for Argentina's central corn and soybean belts Friday through Sunday. Temperatures will be above normal with highs around 88-98 F. The corn and soybean areas will be hot over the weekend into Monday and then turn cooler with a chance of showers on Tuesday and Wednesday, Meteorlogix said.

 

In pit trades, Citigroup bought 300 March and 700 May, Fimat, RJ O'Brien and Refco each bought 1,000 March, Man Financial bought 500 March, and Rosenthal bought 800 March. ABN Amro sold 1,000 May, Rand Financial sold 700 March, Refco sold 1,800 March and UBS Securities sold 2,800 March. Commodity fund buying was pegged between 3,000 and 4,000 lots.

 

South American soybean futures ended sharply higher. The March futures finished 14 1/2 cents higher at US$6.19.

 

 

SOY PRODUCTS

 

Soymeal futures catapulted to three-week highs, propelled by technical buying. The market surged higher down the stretch, fueled by buy stops as the March contract eclipsed technical resistance at its 20-day and 50-day moving average en route to filtering into a chart gap left from Jan. 9. This was consistent until resistance at its 40-day moving average, US$187.00, surfaced to temper the gains on the close.

 

Soyoil futures made strong strides higher, in tune with the gains in soybeans, managing to fill a technical chart gap left from Jan. 12, with futures propelling through resistance at its 50-day moving average, basis the March contract. March oil share ended at 37.17%, and the March crush was at 63 1/2 cents.

 

In soymeal trades, buyers were scattered among various commercial and commission houses. On the sell side, ADM Investor Services sold 400 March, Fimat sold 500 March, O'Connor sold 600 March and Rand Financial sold 300 March.

 

In soyoil trades, Man Financial bought 1,000 March, Fimat bought 500 March, O'Connor bought 400 March, Iowa Grain and Calyon Financial each bought 300 March. ABN Amro sold 400 May, and Citigroup and Iowa Grain each sold 300 March. Speculative fund buying was pegged at 2,500 lots.