April 2, 2008

 

CBOT Soy Review on Tuesday: Bounce on oversold markets, spread adjustments

 

 

Chicago Board of Trade soybean futures ended higher Tuesday, staging a strong turnaround from sharp early losses on technical buying and adjustments in spread relationships, analysts said.

 

May soybeans settled 13 3/4 cents higher at US$12.11, July soybeans finished 19 cents higher at US$12.34 and November soybeans ended 57 3/4 cents higher at US$11.47 1/4. May soymeal settled US$8.20 higher at US$330.50 per short tonne. May soyoil finished 67 points higher at 52.15 cents per pound.

 

A technical correction from oversold market conditions served as the catalyst for the market's gains, as prices bounced after holding underlying support levels, said Darrin Newsom, analyst with DTN in Omaha, Neb.

 

It was a typical reaction following Monday's slide, with end-of-the month and quarter panic selling in addition to acreage and stocks data exaggerating Monday's losses, Newsom added.

 

Speculative and commercial buying fueled the recovery bounce, with the adjustment of spread relationships serving as the spark to ignite new crop futures into a leadership role of the day's gains, analysts said.

 

Speculation that Monday's prospective plantings estimate was overstated and could be the largest soy acres number the market may see this spring, helped rekindle buying interest in new crop futures, said Brian Hoops, president Midwest Market Solutions in Yanktonne, S.D.

 

The market needed to widen the soy/corn spread, after it tightened by US$3.00 a bushel since late February and the spread ratio shrank from 2.6 to 1 to 1.8 to 1 in the same time frame, Hoops said.

 

The spread relationship had fallen to levels similar to 2007 when corn bought acres from soybeans, so the market had to adjust prices in order to not give farmers an economic incentive to switch some acres back to corn, Hoops added.

 

Looking forward, the battle for acres will continue to create gyrations in the market, as traders and analyst debate acreage assumptions, while keeping a close eye on Midwest weather for signs of planting disruptions and delays that may adjust seeding intentions, analysts added.

 

By virtue of the soy complex not settling at their respective lower daily trading limits, price limits Tuesday will revert back to their normal daily trading limits in soybean and soymeal at 70 cents per bushel and US$20.00 a short tonne respectfully. The limits on soyoil will drop to 350 points or 35 cents per pound.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 4,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures rallied, retracing some of Monday's sharp declines in unison with soybeans. The markets traded in a wide range, plunging initially, before exhausted selling and spillover from soybeans sparked technical buying to rekindle some upside momentum, analysts said. The markets were overdue for a bounce following losses experienced in previous sessions, with efforts to keep spread relationships in the products in line keeping futures moving in tandem, analysts added.

 

May oil share ended at 43.99% and the May crush ended at 83 1/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 4,000 lots. Meanwhile, active commercial crush spreading was featured, traders said.

 

In soyoil trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 3,000 lots, and commercial buying estimated at 3,000 lots.