February 9, 2010

 

CBOT Soy Review on Monday: Beans set 1 1/2-week high on pre-report short cover

 

 

Soy futures at the Chicago Board of Trade climbed to 1 1/2 week highs Monday, rallying on speculative short covering ahead of government supply and demand reports.

 

CBOT March soy ended 16 cents, or 1.75%, higher at US$9.29 1/2, and May soy settled 15 3/4 cents, or 1.70%, higher at US$9.40.

 

Speculative funds were estimated buyers of 7,000 lots in soy, 1,000 lots in soymeal, and 4,000 lots in soyoil.

 

The market bounced, garnering strength from oversold conditions, with traders squaring some short positions heading into an anticipated positive supply and demand report, analysts said.

 

The absence of a bearish outside market influence added to the supportive tonnee, with a weaker U.S. dollar and firmer crude oil and metal futures lending strength.

 

Futures experienced a long overdue rally, with technical buying coming onboard after active contracts broke out of a downward channel on technical charts, said John Kleist, broker/analyst at Allendale Inc.

 

The longer-range trend remains bearish with record projected South American production, but it's a little early in the season to bury prices, with the bulk of Brazil and Argentina's harvest still ahead, Kleist added.

 

Otherwise, the market lacked fresh fundamental inputs to underscore the day's price action. Strength in soyoil helped prices as the market looks for a tighter U.S. supply and demand balance sheet.

 

The U.S. Department of Agriculture is scheduled to release its February supply and demand report Tuesday at 8:30 a.m. EST (1330 GMT). USDA is expected to fine-tune its supply-and-demand tables, with alterations to exports and crush projections tightening the balance sheet.

 

The average of analysts' estimates peg 2009-10 U.S. soy ending stocks at 219 million bushels, down 26 million from January's forecast. The estimates ranged between 170 million and 245 million bushels.

 

Tuesday's USDA report will be important "more so from the world numbers," said Don Roose, president of U.S. Commodities. "I think the U.S. numbers are kind of stuck," he said.

 

South American crops have benefited from "excellent weather" and "ideal growing conditions," and that could lead to upward adjustments of 500,000 metric tonnes in both Brazil and Argentina, said Roose.

 

 

Soy Products

 

Soyoil futures rallied to three-week highs Monday, climbing on speculative buying. The combination of short covering ahead of Tuesday's supply and demand report and bullish usage outlooks tied to improved biodiesel production prospects served as the catalyst for the gains, traders said. The ability of futures to pierce through overhead chart resistance, and adjustments in the meal/oil spread underpinned prices as well, with soyoil gaining product share. Meanwhile, higher crude oil futures provided support for prices also.

 

Soymeal futures ended higher, in tune with the rest of the soy complex.

 

March soymeal settled at US$3.40, or 1.25%, higher at US$274.40. March soyoil gained 95 points, or 2.57%, to 37.95 cents per pound.

 

March oil share was 40.88%, while the March soy crush ended at 91 3/4 cents.