March 20, 2009

 

CBOT Soy Review on Thursday: Soy gains above 25 cents on fed news, dollar drop

 

 

Chicago Board of Trade soybean futures rallied Thursday, inspired by the precipitous drop of the U.S. dollar after the Federal Reserve said it planned to inject more than US$1 trillion into the U.S. economy.

 

May soybeans rose 25 1/2 cents to US$9.40 1/2. The contract traded within an 19 1/2-cent range, topping at US$9.52 1/2. July gained 28 1/4 cents to US$9.40. November soybeans rose 36 1/2 cents to US$8.92 1/2. The contract traded within a 20-cent range, topping at US$8.99. Speculative funds bought 6,000 soybean lots, according to a post-close estimate.

 

"The fact that Monday's surge in the May contract was followed by two days at even higher levels was the first sign that the market had further upside potential," Fortis said in a market commentary Thursday.

 

"[Wednesday's] quantitative easing action by the Fed simply added impetus," Fortis said. "This should convince investors to shift some cash into commodity funds and it should also make the managers of trend-following funds leery about adding to their short positions."

 

While inflation may pose problems down the road, the soybean markets will be hard-pressed to test lows in the near term, Fortis added.

 

"We've been from hyper inflation to deflation to reinflation," a CBOT floor trader said. "We'll see where we go, whether the landing is hard, soft or bounces around."

 

He said he expected the dollar to soon establish a near-term bottom, which should accompany a near-term top in commodities, and short-covering activity in the agricultural commodities heading into the weekend.

 

"The dollar's been decimated," he said. "The only thing you can own is the hard, physical commodities. It makes it difficult to trade when the Fed takes the risk out the market."

 

Inflationary moves may not be bullish in the long-term because of the pressure it promises to offer equities, he added.

 

 

Soy Products

 

The CBOT soy complex posted strong gains Thursday, inspired by the increases logged across the commodities markets.

 

May soymeal gained US$6.80 to US$296.30 per short tonne and May soyoil added 97 points to 31.89 cents per pound.

 

Funds bought 1,000 soymeal lots and 2,000 soyoil lots, according to a post-close estimate.

 

May oil share ended at 34.99% and the May crush ended at 62 1/4 cents.

 

India's soyoil import tax dropped to zero from 20%, India Trade Secretary G. K. Pillai said Thursday.

 

India's soyoil import tax repeal is seen as positive for U.S. soy prices and slightly negative for palm oil, Fortis said.