March 30, 2010

 

CBOT Soy Review on Monday: Rallies on weak dollar, Argentine strike

 

 

The combination of a weaker U.S. dollar and concerns about an Argentine port strike sparked Chicago Board of Trade soy futures to one-week highs Monday.

 

Nearby CBOT May soy, which is also the most-active contract, settled 15 1/2 cents higher, or 1.63%, at US$9.67 1/2 per bushel.

 

The decline in the dollar was the underlying driver of the day's gains, providing bullish psychological support to a host of commodity markets, analysts said.

 

A weaker dollar is often seen as supportive, attracting speculative buying because of perceptions that it makes U.S. grain and oilseeds more attractive to foreign buyers and increases investor appetite for risk.

 

In the absence of any fresh fundamental news, the expansion of an Argentine port strike provided additional strength to attract buyers to the market, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

Last week, striking workers began blocking access to two Argentine port complexes lining the banks of the Rio de la Plata in Rosario, Argentina's main grain export hub. However, the blockades were extended to seven ports over the weekend, affecting the operations of Cargill Inc., Bunge Ltd.'s (BG), Nidera, Aceitera General Deheza and Dreyfus, according to local press reports.

 

With a record Argentine soy harvest already likely to test the country's capacity for transport, storage and shipping, the disruption at the ports is sparking alarm. Argentina is the world's third-largest exporter of soy.

 

Bull spreading was featured as well, with nearby contracts climbing verses deferred months. Concerns that a shift of South American business to U.S. origins could strain already tight projected U.S. ending stocks buoyed old crop futures, analysts said.

 

Short covering ahead of a potentially bullish quarterly stocks report on Wednesday helped support prices as well. However, upside momentum was capped by profit-taking pressure, as traders sold previously bought positions after the most active May contract failed to push through technical resistance at the contract's 200-day moving average, a CBOT floor analyst said.

 

Speculative funds were estimated buyers of 6,000 lots in soy, 1,000 lots in soymeal, and 3,000 lots in soyoil. Fund activity is a measure of investment money flow in the market.

 

 

Soy Products

 

Soy product futures spiked higher with soy. Soymeal futures rallied with nearby contracts climbing to five-week highs. The combination of broad-based commodity gains and concerns about an expanding port strike in Argentina served as catalysts to lift prices, analysts said. Argentina leads the world in soymeal and soyoil exports. May soymeal ended US$6 higher, or 2.21%, at US$276.90 per short tonne.

 

Soyoil futures ended higher, buoyed by spillover strength from sharp gains in crude oil futures. However, the market trimmed its gains down the stretch, under pressure from meal/oil spreading, traders said. Soyoil prices are linked to energy prices, as soy oil is the primary feedstock for U.S. biodiesel fuel. May soyoil settled 0.32 cents higher, or 0.82%, at 39.27.

 

May oil share was 41.6% while the May soy crush margin ended at 73 1/2 cents.