February 6, 2009

 

CBOT Soy Review on Thursday: Climb; speculative short covering, South America crop woes

 

 

Chicago Board of Trade soybean futures climbed to new highs for the week Thursday, as South American crop concerns sparked speculative short covering.

 

CBOT March soybeans finished 30 1/2 cents higher at US$9.80. March soymeal settled US$7.50 higher at US$308.00 per short tonne. March soyoil finished 70 points higher at 33.05 cents per pound. In pit trades, speculative fund buying in soybeans was estimated at 4,000 lots.

 

Thursday was a reflection of short covering and repositioning, after recent price setbacks, buoying the market, with declining South American crop prospects providing a supportive underlying theme, said Gavin Maguire, analyst with e-hedger in Chicago.

 

The most-active contract rose to new highs for the week, with technically inspired buying surfacing after futures eclipsed resistance at recent highs.

 

Lingering crop concerns remained an underpinning force, with declining crop estimates for Argentina and Brazil coupled with extended weather forecasts calling for warmer/drier conditions feeding bullish appetites, traders said.

 

However, futures remain within a month-long trading range, as South American crop concerns are an old story that's important enough to prop up prices, but not enough to push prices out of their trading range, Maguire said.

 

Upside movement provided some opportunities for producers to sell some cash supplies and recent rains were seen as helpful to Argentine soy crops, and that helped cap upside potential, he added.

 

The T-storm 7-day weather pattern for Argentina is non-aggressive with thunderstorms from Sunday to Tuesday, though it continues to show weak energy sliding eastward.

 

"We believe the energy is likely to slide across key growing areas early next week, but rain chances are not imminent due to questionable humidity," said T-storms Mike Tannura. "If the current hints from various weather models grow stronger, we may need to reduce rain chances for this period," he added.

 

The National Commodities Supply Corp., or Conab, on Thursday estimated Brazil's 2008-09 crop year soybean production at 57.2 million metric tonnes. The U.S. Department of Agriculture estimated the crop at 59 million metric tonnes on Jan. 12.

 

Argentina's 2008/09 soybean production forecast fell to 42.5 million tonnes as a result of smaller harvested area and an expected decline in overall yield due to the severe drought situation, according to a USDA attache report posted Wednesday on the Foreign Agricultural Services Web site. USDA reported Argentina production at 49.5 million tonnes in its supply and demand report Jan. 12.

 

 

SOY PRODUCTS

 

Soy product futures prices advanced in unison with soybeans. Lingering Argentina crop worries amid forecasts for a return to drier conditions and smaller production outlooks provided support. Argentina is global leader in soyoil and soymeal exports.

 

Soyoil futures garnered additional strength from the unwinding of meal/oil spreads. Soymeal was buoyed by solid weekly export sales.

 

March oil share ended at 34.92% and the March crush ended at 61 1/4 cents.

 

In pit trades, speculative fund buying was estimated at 2,000 lots in soyoil.