February 21, 2007

 

CBOT Soy Review on Tuesday: New contract highs amid tech strength

 

 

Chicago Board of Trade soybean futures Tuesday set new contract highs and ended near the contract highs on technical strength and speculative-led buying, analysts said.

 

March soybeans settled up 4 cents at US$7.71 per bushel, and May soybeans closed 4 1/2 cents higher at US$7.87. March soymeal finished up US$3.30 at US$230.60 per short tonne, while March soyoil settled 22 points lower at 29.69 cents per pound.

 

March soybeans traded electronically at a new contract high of US$7.72 1/4 per bushel, exceeding the previous contract high of US$7.68 1/2. May soybeans set a new electronic high of US$7.88, topping the previous contract high of US$7.84 1/4.

 

Soybeans also hit new contract highs last week, establishing strong upward technical momentum, sources said.

 

Along with the technical strength, there was ongoing fundamental support from expectations for a sharp decline in the U.S. soybean acres planted this spring, added Doug Houghtonne, analyst with Brock Associates. Market participants expect many farmers to plant corn instead of soybeans to take advantage of growing demand for ethanol.

 

"The soybean market is clearing anticipating a big drop in acreage here this spring," Houghtonne said.

 

Looking ahead, Houghtonne said the soybean market is technically in an overbought condition and may see a sharp correction in the near term. Still, he said sellers may be scarce ahead of a U.S. Department of Agriculture acreage report due out in March.

 

Fears about the impact that excessive rainfall will have on Brazil's soybean crop also remained friendly to prices, floor sources said.

 

Northern Brazil soybean areas continue to receive daily showers and thunderstorms, which are causing further harvest delays and reducing the quality of the soybean crop in Mato Grosso and Goias provinces, according to DTN Meteorlogix.

 

"The stubborn rain pattern may result in a reduction of the total harvest size in Brazil," Meteorlogix said.

 

Houghtonne noted the persistent wetness also is impeding transportation of crops that have already been harvested in Brazil's center-west region.

 

Crop prospects for soybeans remain optimistic in southern Brazil and Argentina, although "the reduction in harvest quality and quantity due to losses in Mato Grosso may be too great for even significant yields from southern Brazil and Argentina to make up," the weather firm reported.

 

In other news, the USDA reported U.S. weekly soybean export inspections for the week ended Feb. 15 totaled 27.207 million bushel, below analysts' estimates. Analysts had pegged the inspections to be 33to 38 million.

 

Still, the inspections were higher than a week earlier, when 26.207 million bushels were inspected for export. For the marketing year to date, 702.929 million bushels were inspected, compared to 572,821 million the previous marketing year.

 

In pit trades, Fimat bought 500 March and 300 May, while JP Morgan bought 300 March. Bunge sold 300 May. Funds bought an estimated 1,000 contracts. Rand Financial spread 400 March/May. Man Financial spread 1,300 May/March.

 

The Commodity Futures Trading Commission said Friday that index traders were net long 135,538 combined CBOT soybean futures and options contracts as of Feb. 13, up slightly from 135,842 in the prior week. Large non-commercial traders were net long 81,876, down from 84,901 contracts the previous week, according to the CFTC.

 

 

SOY PRODUCTS

 

CBOT soybean product futures settled mixed, with soymeal setting a new contract high on technical support. March soymeal set a new contract high of US$230.70 per short tonne on technical strength, exceeding the previous high of US$227.50.

 

Soyoil closed in negative territory under pressure from weaker outside markets and fund selling. Funds bought an estimated 500 soymeal contracts and sold an estimated 1,000 soyoil contracts.

 

In soymeal pit trades, JP Morgan sold 500 March and Fortis sold 400 December. Fimat bought 300 May. In soyoil pit trades, JP Morgan bought 400 March and 400 May, while Bunge bought 300 May. Fortis spread 400 May/March soymeal, and JP Morgan spread 300 March/May soyoil.

 

Index traders were net long combined soyoil futures and options position by 72,803 contracts, up slightly from the previous week's 72,038 contracts. Large non-commercial traders were net long 63,518 soyoil contracts, up from 64,304 contracts a week earlier.

 

Large non-commercial traders were reported to be net long combined futures and options positions in soymeal by 55,260 lots, compared to net longs of 39,350 contracts a week earlier, according to the CFTC.