February 14, 2007

 

CBOT Soy Review on Tuesday: Ends up on technicals, spillover support

 

 

Chicago Board of Trade soybean futures ended higher Tuesday on technical strength, concerns about the crop in South America and spillover support from other markets, sources said.

 

March soybeans closed 9 3/4 higher at US$7.55 per bushel, and May soybeans finished up 9 3/4 cents at US$7.71 1/2. March soymeal ended up US$3.80 at US$222.70 per short tonne, while March soyoil closed 12 points higher at 30.01 cents per pound.

 

Although soybeans finished lower Monday, no technical damage was done and prices bounced back for a "Turnaround Tuesday," a floor source said.

 

Stronger outside markets, notably crude oil futures, spurred soybeans' gains, analysts noted. With little fresh news out, traders were looking to the energy market for direction, a source said.

 

CBOT corn and wheat also ended higher and helped create a positive tonnee for soybeans, added Joe Victor, analyst with Allendale.

 

"When you can get all three (markets) moving in the right direction, that definitely had to be supportive for the soybean market," Victor said.

 

March and May soybeans came close to hitting contract highs but could not muster enough strength to advance that far, a floor trader noted. The high for the March contract is US$7.57, and the May high is US$7.72 1/2.

 

Funds bought an estimated 2,000 contracts. In pit trades, Fimat bought 300 March and 300 May. Calyon bought 300 March. Iowa Grains spread 600 May/March, and Fimat spread 500 May/March.

 

There was further support for soybeans from concerns about the soybean crop in South America, Victor noted. There is talk that soybean rust may have damaged Brazil's crop and that private estimates for a record output might need to be revised downward, he said.

 

In Brazil's largest soybean-producing state, Mato Grosso, daily episodes of showers and thundershowers continue, according to the DTN Meteorlogix weather firm. Mato Grosso is at risk for yield-reducing soybean rust outbreaks because of a persistent warm and moist weather pattern, the firm reported.

 

"One of the groups down there was suggesting that some of the earliest harvest results coming out of the center-west region were about average," instead of at high levels, Victor said.

 

Brazil's 2006-07 soy crop was 7% harvested as of Feb. 13, agribusiness consulting firm AgRural said Tuesday. The number was just three percentage points higher than last week's estimate as the heavy rains in Mato Grosso have affected farmers' ability to harvest, the firm reported.

 

"Mato Grosso is going to be inundated with rain over the next three weeks," Agroconsult consultant Fabio Meneghin said. "That farms will lose production is a guarantee, but we are looking at excellent productivity in the south and northeast that could make up for any declines in Mato Grosso."

 

Talk among floor traders about soybean rust in Brazil was seen as another supportive factor.

 

Looking ahead, CBOT soybean prices will likely stay strong until the market gets a better idea on the output in Brazil, Victor said. Talk that U.S. farmers will swap soybeans for corn in spring planting also should remain supportive until planting estimates are released in March, a floor source noted.

 

On Wednesday, the National Oilseed Processors Association's January soybean crush report is expected to show a slight decrease in the U.S. crush rate from December, according to a survey of industry analysts. The average analyst estimate for the January soybean crush was 149.1 million bushels, down from the 149.2 million bushels NOPA reported in December.

 

 

SOY PRODUCTS

 

CBOT soybean product futures ended higher as soymeal set a new contract high on technical strength, sources said. March soymeal set a new contract high at US$222.30 per short tonne, exceeding the previous contract high of US$220.00.

 

Meal felt further support from ideas that cold weather in the central U.S. is likely to increase livestock feeding, Victor said.

 

Stronger outside markets boosted soyoil, sources said. Gold, silver and crude oil were all stronger and added to a positive tonnee for the soy complex amid an absence of other news, a source added.

 

Funds bought and estimated 1,000 soymeal and 500 soyoil.

 

In soymeal pit trades, Tenco bought 1,000 May and 500 March. Fortis sold 500 May. Tenco spread 500 March/May and 500 May/March. In soyoil trades, Tenco sold 700 March, while Citigroup spread 500 March/May.

 

NOPA soyoil stocks are expected to increase to 2.720 billion pounds from the 2.605 billion reported in December, according to the survey of analysts.