March 11, 2010

 

CBOT Soy Review on Wednesday: Up as beans bounce on technical buys, outside markets

 

 

Chicago Board of Trade soy futures rallied Wednesday, managing to bounce off initial losses on technical buying, a lack of fresh bearish news and support from outside markets.

 

Futures initially stumbled with corn futures, succumbing to the defensive theme in grain futures. However, without a bearish surprise in the U.S. Department of Agriculture's supply and demand report and a recovery in crude oil futures, selling quickly exhausted, opening the door for buying to emerge.

 

CBOT March soy ended 10 1/2 cents, or 1.12%, higher at US$9.52 per bushel, and May soy settled 10 1/2 cents, or 1.11%, higher at US$9.58.

 

The price bounce was accelerated by the May contract's ability to trigger pre-placed buy orders once futures pierced through overhead resistance on technical charts.

 

The overall theme was more consolidative in nature, with talk of Chinese purchases being switched to U.S. origins due to back-ups at ports in Brazil providing underlying fundamental support, a cash-connected CBOT floor analyst said.

 

Meanwhile, the market received some support from the government's downwardly revised ending stock estimate.

 

The carryout revision was not a surprise, but by dropping the ending inventory figure below 200 million bushels, it provided psychological strength, particularly with uncertainty still surrounding the soy harvest in Brazil, said Mike Zuzolo, president Global Commodity Analytics.

 

Otherwise, traders say activity was subdued with soy/corn spreading featured amid the bearish impact of the day's supply and demand report on corn futures.

 

Speculative funds were estimated buyers of 6,000 lots in soy and 3,000 lots in soyoil. Fund activity is a measure of investment money flow in the market.

 

On tap for Thursday, U.S. Department of Agriculture's weekly export sales report will be released at 8:30 a.m. EST. Analysts surveyed by Dow Jones Newswires estimate soy sales for the week ended Feb. 25 to be in the range of 200,000 to 350,000 metric tonnes. Soymeal export sales are seen between 75,000 and 150,000 tonnes, while soyoil sales are pegged between 10,000 and 20,000 tonnes.

 

 

Soy Products

 

Soyoil futures rose to 2-month highs, energized by bullish demand potential. Optimistic outlooks for a pick up in demand amid a narrowing differential between soyoil and palm oil prices and hope for passage of a biodiesel tax credit provided underlying strength, analysts said. A recovery from early losses in crude oil futures provided some spillover support to aide the advances as well. The demand optimism overshadowed a bearish 400 million pound increase in estimated U.S. soyoil ending stocks.

 

Soymeal futures ended narrowly mixed, unable to climb with the rest of the soy complex amid diminishing demand potential in the face of competition from South America, traders said. Soyoil/soymeal spreading was featured once again, with soyoil gaining a larger percentage of the overall crush value of soy.

 

March soymeal settled US$0.30, or 0.12%, lower at US$258.70, and the May contract ended US$0.50, or 0.19%, higher at US$259.20 per short tonne. March soyoil gained 72 points, or 1.80%, to 40.69 cents per pound, while the May contract settled 72 points, or 1.79%, higher at 41.02 cents.

 

May oil share was 44.18% while the May soy crush ended at 63 1/2 cents.