June 3, 2006

 

CBOT Soy Review on Friday: Soars,weather issues spark speculators,tech buys

 

 

Chicago Board of Trade soybean futures ended Friday's session posting sharp gains, bolstered by speculative short covering and technically related buying, with concerns over long range weather patterns sparking the upward assault.

 

July soybeans ended 22 1/4 cents higher at US$6.09, July soymeal settled US$10.20 higher at US$185.40 a short tonne and July soyoil ended 28 points higher at 25.43 cent a pound.

 

Private forecasters talking up the potential for a change to a hot and dry weather pattern in the western Midwest next week, coupled with big fund buying and outside market strength served as the catalysts to lift futures to two-week highs, said Vic Lespinasse, analyst and broker with A.G. Edwards and Sons in Chicago.

 

The weather scenario kept the market unsettled, as nervous shorts ran for cover ahead of the weekend, with heavy buy-stops activated once active contracts bull dosed through meaningful overhead resistance levels, traders said.

 

The threat of hot and dry conditions was enough to force some shorts out of the market as well keep potential sellers on the sidelines, added Lespinasse.

 

Traders said buy-stop orders were laddered up from US$5.90 1/2-50-day moving average on through the 200-day moving average US$6.02 per bushel level basis the July future, as traders did not want to be caught short ahead of the weekend with the threat of hot/dry weather looming in the western Midwest in last half of next week.

 

Meanwhile, analysts say technicals were a key driver of prices as well, with a solid technical performance Thursday and the inability of futures break support in prior sessions giving the appearance that a near term bottom was in place. Inflationary fears added support to the market as well, traders said.

 

In pit trades, ADM Investor Services bought 1,500 July, ABN Amro and Rand Financial each bought 3,000 July, Man Financial bought 2,000 July, RJ O'Brien bought 1,300 July and Calyon Financial bought 1,000 July. Commodity fund buying was estimated at 14,000 contracts.

 

On the sell side, UBS Securities sold 3,000 July, Tenco sold 1,000 July, FCStonnee and Term Commodities each sold 500 November. South American soybean futures ended higher, with the July future settling 22 cents higher at US$6.21.

 

 

SOY PRODUCTS

 

Soymeal futures soared to over 3-month highs Friday, rocketing on speculative and technical buying. Spillover momentum from soybeans and solid weekly export sales provided the spark for the initial gains, with big fund buying uncovering buy stops and aggressive short covering, analysts said. The threat of adverse weather for soybean crops next week with a sizable fund short position in the market attracted short covering to push prices through meaningful technical resistance, traders added.

 

Soyoil futures ended higher across the board, but proved to be the weakest link in the complex, with the unwinding of soyoil/soymeal spreads and lack of a need for funds to cover short positions leaving futures lagging behind the gains in meal and beans, analysts said. Nevertheless, prices were supported by the energy component of soyoil and biodiesel in relation to crude oil price gains.

 

July oil share ended at 40.68%, and the July crush ended at 78 1/2 cents.

 

In soymeal trades, ADM Investor Services bought 1,700 July, Man Financial bought 3,000 July, Calyon Financial and Iowa Grain each bought 2,000 July, JP Morgan and RJ O'Brien each bought 1,000 July. Commodity fund buying was estimated at 12,000 contracts. JP Morgan sold 1,000 July.

 

In soyoil trades, Citigroup bought 700 July, JP Morgan bought 800 July and Tenco bought 900 July. JP Morgan sold 500 July and Fimat sold 300 July. Commodity fund buying was estimated at 4,000 contracts.