May 12, 2006

 

CBOT Soy Review on Thursday: Rally; speculators buy amid inflation concerns

 

 

Chicago Board of Trade soybean futures briefly rallied to a two-month high Thursday, roaring to the upside as funds, or large speculators, bought aggressively amid the supportive influence of strength in outside inflationary markets.

 

July soybeans ended 7 cents higher at US$6.13, July soymeal settled US$0.10 lower at US$178.70 a short tonne, and July soyoil ended 104 points higher at 26.32 cent a pound.

 

Inflationary signals amid the continued surge in metals and energy markets as well as weakness in the U.S. dollar versus other major currencies fueled the market's charge as the flow of speculative money continues to move into commodities, said Anne Frick, senior oilseeds analysts with Prudential Financial in New York.

 

Technical strength played a key role in the market's rise, with advances accelerating after buy stops were activated once the July future eclipsed formidable resistance above US$6.14 per bushel, traders said. However, late profit taking and hedge-related commercial selling managed to trim the gains down the stretch.

 

A climb to two-week highs in soyoil, the potential for planting delays amid cool, wet conditions in the Midwest and talk of farmer protests halting soybean movement in Brazil, possibly shifting some demand to the U.S. added to the bullish tonnee in the market, traders added.

 

Nevertheless, speculative buying was the dominant force in the market, allowing futures to divorce themselves from bearish fundamental outlooks. It's hard to ignore surging gold and silver markets, with the rising tide of commodities keeping sellers' hands in their pockets regardless of record projected inventories, said Dan Basse, president AgResource Company in Chicago.

 

On Friday, the U.S. Department of Agriculture is expected to project burdensomely high old- and new-crop ending stocks when they release their latest supply and demand reports. The average of analysts' estimates projects 2005-06 ending stocks at 568 million bushels. The estimates ranged from 555 million to 585 million bushels. In April, USDA projected the 2005-06 carryout at 565 million bushels. The average of analysts' estimates projects 2006-07 ending stocks at 678 million bushels. The estimates ranged from 621 million to 729 million bushels.

 

Meanwhile, the DTN Meteorlogix weather outlook said temperatures in the entire Midwest will continue in a below- to much-below-normal trend over the next 10 days. Overnight lows west of the Mississippi will drop to the upper 30s to mid 40s Fahrenheit, with daytime highs only in the 50s to low 60s F. East of the Mississippi, additional rain showers will develop from Thursday through Saturday, with temperatures below to much-below normal. This cool and unsettled weather pattern will hinder fieldwork progress and crop planting, as well as slow down the pace of development for newly emerging crops, Meteorlogix said.

 

In news, soybean stocks ran out Thursday during the peak soy export season at Sperafico Agroindustrial, a soy crusher in Mato Grosso, because protesting farmers have successfully closed grain silos and blocked all farm commodity transit in the state, the company's commercial manager told Dow Jones Newswires.

 

In pit trades, ABN Amro, Man Financial and Prudential Financial were featured buyers with commodity funds net buyers on the day.

 

On the sell side, ADM Investor Services, FCStonnee, Term Commodities were sellers, with Man Financial, Tenco and UBS Securities sellers as well. South American soybean futures ended higher. The July future settled 2 cents higher at US$6.33.

 

 

SOY PRODUCTS

 

Soyoil futures took on a dominant role in the soy complex Thursday, soaring to two-week highs on the infusion of speculative buying as traders looked over their shoulders at rising crude oil futures, said Basse. The flow of speculative money into commodities has investors looking for energy related components, with biodiesel enthusiasm fueling speculative interest, traders said.

 

Soymeal futures ended with light losses, losing product share on soyoil's speculative surge. Soyoil/soymeal spreading helped keep the market on the defensive, with a seasonal slow down in exports and domestic meal demand provided little support to offset the trend, analysts said.

 

July oil share rallied almost 1 percentage point to 42.41%, and the July crush ended at 69 3/4 cents.

 

In soymeal trades, light buying was scattered among various firms, with Bunge Chicago, RJ O'Brien and Fimat sellers.

 

In soyoil trades, Citigroup, JP Morgan, RJ O'Brien, Refco, and Tenco were key buyers with Bunge Chicago, Fimat, JP Morgan and Tenco sellers. Aggressive commodity fund buying was reported.