April 12, 2006

 

CBOT Soy Review on Tuesday: Up,bounces back from oversold conditions

 

 

Chicago Board of Trade soybean futures ended Tuesday's session firmly planted in positive territory, bouncing back from oversold conditions on speculative led buying.

 

May soybeans finished 7 1/4 cents higher at US$5.62 1/2, July soybeans ended 8 cents higher at US$5.77, May soymeal settled US$2.80 higher at US$171.20 a short tonne and May soyoil ended 33 points higher at 22.96 cents a pound.

 

The market had dropped a fair amount in recent weeks, leaving futures oversold and with rising energy, metals and wheat futures, there was room for short covering to emerge, said Dan Basse, president of AgResource company in Chicago.

 

Speculative led buying was a featured attraction with futures able to climb above Monday's highs as oversold market conditions and trade positioning heading toward a long three-day weekend helped sustain price strength.

 

Nevertheless, futures continue to maintain bearish underlying fundamentals, but with commodity funds approaching record short futures and options combined positions, traders were a bit hesitant to extend downside pressure, particularly with wheat continuing to push higher, Basse adds.

 

The theme was consistent throughout the day, as a quiet news front limited price volatility while spread rolling pushed the May/July spread out to a 14 1/2 cent carry on the close. Meanwhile, talk of potential harvest delays in South America and technical considerations provided light strength to aid the firm tonnee.

 

The DTN Meteorlogix weather forecast said South America's soybean areas have some potentially significant harvest delays ahead due to rainfall. Southern Brazil will be mainly dry through Thursday, before rain and thunderstorms develop over Rio Grande do Sul on Friday into Saturday. Early indications are that that rain could be moderate to heavy from these storms resulting in harvest shutdowns over the weekend in Rio Grande do Sul and southern Parana.

 

In central Argentina, showers and thunderstorms are expected Wednesday night into Thursday with up to one inch of rain and locally heavier precipitation. The showers and thunderstorms will bring some harvest delays, particularly in Cordoba and Santa Fe provinces, Meteorlogix said.

 

In pit trades, JP Morgan bought 2,000 November, Rand Financial and USA Trading bought 1,000 May, ABN Amro bought 500 July, Calyon Financial bought 500 May. Commodity fund buying was estimated near 8,000 contracts. On the sell side, Fimat sold 400 May and 1,000 July, RJ O'Brien sold 700 May and UBS Securities sold 600 July.

 

In spreads, Iowa Grain spread 3,200 July/May, Fimat spread 1,500 July/May and JP Morgan spread 1,600 May/July.

 

South American soybean futures ended higher across the board. The May future finished 7 cents higher at US$5.89.

 

 

SOY PRODUCTS

 

Soymeal futures ended higher across the board, rebounding from oversold market conditions on speculative buying and spillover momentum from soybeans. The market staged a consolidative bounce, but the nearby contract was unable to break outside of Monday's trading range as questions surrounding domestic demand continue to limit upside potential, analysts say.

 

Soyoil futures continued its march higher, rising to one-week highs on speculative buying. Nearby prices pushed above technical resistance levels, with talk of the potential for increased biodiesel fuel use amid rising crude oil futures prices attracted speculative buyers.

 

May oil share ended higher at 40.14%, and the May crush was at 66 3/4 cents. In soymeal trades, ADM Investor Services bought 500 May and 500 July, Citigroup bought 500 May and JP Morgan bought 500 July. Calyon Financial sold 1,000 July. Commodity funds were net buyers on the day.

 

In soyoil trades, Citigroup, Rand Financial and Fimat each bought 500 July, Man Financial bought 600 May. Fund buying was estimated near 2,000 contracts. Iowa Grain sold 300 July, O'Connor sold 1,200 May and Tenco sold 500 July.