May 15, 2009

 

CBOT Soy Review on Thursday: Extend rally; fundamentals, technical support

 

 

Chicago Board of Trade soybean futures extended its uptrend to a new 7 1/2 month high Thursday, as bullish underlying fundamentals and technical momentum continued to energize buyers.

 

CBOT May soybeans ended 16 cents higher at US$11.66, July soybeans settled 19 1/2 cents higher at US$11.47 1/2 and November soybeans finished 10 1/2 cents higher at US$9.92.

 

July soy meal settled US$9.80 higher at US$362.30 per short tonne. July soyoil finished 32 points lower at 38.84 cents per pound.

 

Old crop soybeans stocks are very tight, and the U.S. Department of Agriculture's new crop carryout estimate of 230 million bushels does not provide any comfort to the market, said Joe Victor, analyst with Allendale Inc. in McHenry, Ill.

 

The uncertainty of supplies in the face of strong export demand, declining crop forecasts for South America and delayed U.S. plantings was enough to inspire traders into adding risk premium to prices, Victor added.

 

The market is attempting to ration demand, rallying prices to levels that will cool consumption of U.S. soybeans for export and domestic use.

 

Technically inspired buying was featured, with the flow of managed money entering the market rising once futures managed to challenge resistance at Wednesday's highs, traders said.

 

Old/new crop bull spreads were featured once again, with the rise in old crop prices widening the July/November spread to a new high.

 

The July/November spread settled at US$1.56 1/2 a bushel, up from Wednesday's settlement of US$1.46 1/2 cents.

 

Meanwhile, "improvements in oilseed processing during April serves not only to confirm the USDA's recent 5 million bushel increase in forecast 2008/09 crush demand but highlights an important but thus far relatively unrecognized risk to old-crop soybean supplies," JP Morgan reports in a market note. "While the market has focused almost exclusively on rationing soybean export demand in light of a dramatically smaller South American production base, larger product demand stemming from diminished Argentine processing raises the risk of a late- and counter-seasonal uptick in US soybean processing demand," JP Morgan added in the note.

 

 

Soy Products

 

Soy product futures finished mixed once again, with soymeal spiking to a new eight-month high. Strong underlying export demand, technical strength, tight old crop soybean supplies and shrinking South American soy crop prospects served as the catalysts to lift soymeal futures, analysts said.

 

Argentina is the world's third-largest producer of soybeans behind the U.S. and Brazil, but is the global leader in soymeal and soyoil exports.

 

Soyoil futures stumbled, losing ground to soymeal on adjustments in the meal/oil spread relationship. Higher-than-expected April soyoil stocks reported in National Oilseed Processors Association crush report, and weakness in world vegoil markets combined to weigh on prices, analysts said.

 

July oil share ended at 34.99%. The July soybean crush ended at 76 3/4 cents.