February 18, 2006
CBOT Soy Review on Friday: Funds lift soybeans to 1 1/2-month highs
Soybean futures on the Chicago Board of Trade rose Friday on strong fund buying inspired by a positive technical environment when the market opened up above its major moving averages, sources said.
As a result, May soybeans closed in the upper end of the day's trading range and posted the strongest gains in 1 1/2 months.
Most-active May soybeans settled 10 1/4 cents higher at US$6.14 1/2 and March gained 9 3/4 cents to US$6.01 1/4. May soymeal added US$1.70 to US$187.20 a short tonne and May oil gained 73 points to 23.71 cents a pound.
Funds were active buyers in many markets, however, and the widespread commodity buying pushed the Reuters/Jefferies Commodity Research Bureau index up 3.55 to 326.15 on the day, reversing the trend that saw the index plummet this week to its lowest level since Dec. 1.
"It's been big-time fund buying or at least enough to send the market up," said Jack Scoville, analyst and vice president at Price Futures Group in Chicago.
"It's all pretty much technical. We've been trading a down-sloping channel here for the last couple of weeks and today's opening breaks us out of that channel to the upside," he added.
The futures gains spurred strong cash movement in the Midwest and good movement also was noted in Brazil, Scoville said.
Traders are keeping a close eye on South American weather with some concerns over dry conditions supporting the market of late.
Hot and mostly dry conditions are expected during the next five days in Argentina, which will stress the crops. A better chance of thunderstorms exists later next week as a cold front is expected to move through later Wednesday or Thursday, long-range charts show. The rains will be key as the heat wave will rapidly deplete soil moisture, DTN Meteorlogix said.
In Brazil, a few significant thunderstorms have eased developing stress to soybeans in parts of Rio Grande do Sul, though some areas missed these rains and will have to wait about a week before another round of showers shows up.
Fresh news for the market was issued from the U.S. Department of Agriculture's annual Agricultural Outlook Forum in Arlingtonne, Va.
U.S. 2006-07 soybean production was estimated at 2.965 billion bushels, compared to 3.086 billion last year. Planted acres were down 2 million to 74 million acres, the national soybean yield was pegged at 40.7 bushels per acre and harvested acreage was seen at 72.9 million.
The USDA estimated the 2006-07 U.S. crush at 1.730 billion bushels and U.S. export sales were projected at 1.075 billion bushels.
U.S. ending stocks were pegged at 560 million bushels, up just slightly from final 2005-06 stocks of 555 million.
The average U.S. soybean price was projected at US$5.15 a bushel, down from the 2005-06 average of US$5.50 a bushel, the government said.
A USDA economist said that growing soy supplies are expected to pressure prices and discourage plantings in Brazil next season. Production for 2005-06 is estimated at 58.5 million tonnes.
May soybeans attempted to fill a gap left on the charts from Jan. 6, but left part of it unfilled from US$6.17-US$6.20, which becomes technical resistance, an analyst said.
At the CBOT, Calyon Financial bought a net 2,000 May contracts, R.J. O'Brien bought a net 1,500 May and Man Financial bought 1,500 May. Rand Financial, O'Connor, Fimat and ABN Amro each bought 1,000 May, J.P. Morgan bought a net 300 May and Stern bought 200 May.
ADM sold 300 May, J.P. Morgan sold 300 November and Statkin Arbor sold 200 May.
Funds bought an estimated 10,000 soybean contracts, which didn't include any late buying.
SOY PRODUCTS
Soy product markets closed higher, led once again by the strength in oil and the continued rally in soybeans. Fund buying produced most of the gain in both markets.
Soyoil found follow-through support news Thursday that India raised crude palm oil and soybean oil prices to reflect rising global values. A key CPO conference next week in Kuala Lumpur is expected to produce bullish price forecasts, reports said.
May oil rose to a 1 1/2-month high of 23.80 and settled just beneath that level at 23.71 cents. The market is now trading well above its major moving averages.
In oil, Man Financial bought 900 May, Calyon bought 500 March and 300 May, Bunge bought 500 May, Citigroup, ABN Amro and O'Connor each bought 400 May, Fimat bought 300 Mar and 300 May and Iowa Grain bought 300 May. O'Connor sold 400 July and J.P. Morgan sold 500 May.
May soymeal reached its highest level in two weeks at US$188.40, encountered moving-average resistance near this level and settled at US$187.20.
In meal, Man Financial bought 800 March, Fimat bought a net 400 March, R.J. O'Brien bought 600 March, Refco bought 500 March, Calyon bought 400 March and Iowa Grain bought 300 May. J.P. Morgan sold 1,300 March, Fimat sold 200 May and Tenco sold 400 May and a net 200 March.
