March 17, 2010

 

CBOT Soy Review on Tuesday: Extends recovery on limited selling

 

 

Soy futures at the Chicago Board of Trade ended higher Tuesday, continuing to recover from last week's lows as selling was limited and outside market influences provided support.

 

Nearby CBOT May soy, which is also the most-active contract, settled 15 cents, or 1.61%, higher at US$9.45.

 

There was limited cash market selling in the U.S. and South America, but optimistic outlooks for export demand amid logistical problems in Brazil helped the firm tonnee, analysts said.

 

Bullish traders and analysts are hopeful demand will shift back to U.S. origins the longer Brazil experiences loading delays at its ports. Seasonal tendencies for a shift in demand from U.S. to South American origins usually translate into increased exports from Argentina and Brazil in the spring.

 

Buyers were also encouraged by other markets, with a weaker U.S. dollar and strong gains in crude oil futures providing bullish signals in the absence of any other fresh fundamental news.

 

A lower U.S. dollar supports commodity prices due to perceptions that it increases investors' appetite for risk and makes U.S. grain cost less in world markets. Soy are linked to crude oil because biodiesel is made from soyoil and funds often trade in a basket of commodities.

 

The ability of futures to find an area of value above February lows Monday, coupled with tight domestic supplies, served as another feature to encourage buying, analysts said.

 

U.S. ending stocks forecast below 200-million bushels by U.S. Department of Agriculture last week provides strength, particularly with a strong crush pace potentially forcing the USDA to further tighten the 2009-10 balance sheet, a CBOT floor analyst said.

 

Speculative funds were estimated buyers of 5,000 lots in soy, 2,000 lots in soymeal, and 3,000 lots in soyoil. Fund activity is a measure of investment money flow in the market.

 

 

Soy Products

 

Soyoil futures rallied, managing to bounce after a three-day slide. The bullish influence of sharply higher crude oil futures, a weaker U.S. dollar and ideas that recent declines were overdone opened the door for prices to recover, analysts said. Optimistic outlooks for world vegoil demand on increasing biofuel use and growing world populations helped underpin prices, analysts said.

 

Soymeal futures settled higher, feeding off the bullish theme in soy, as well as supportive outside market influences.

 

May soymeal ended US$3.90 or 1.51% higher at US$261.50 a short tonne, while May soyoil settled 62 points or 1.60% higher at 39.37.

 

May oil share was 43.28% while the May soy crush ended at 63 1/2 cents.