June 12, 2008

 

CBOT Soy Review on Wednesday: Futures soar; limit up on floods, outside markets

 

 

Chicago Board of Trade soybean futures soared Wednesday, rallying on crop concerns associated with Midwest flooding and outside market influences.

 

July soybeans settled 70 cents higher at US$15.16 1/2 and November soybeans ended 68 cents higher at US$15.09. July soymeal settled US$20 higher at US$398.50 per short tonne. July soyoil finished 235 points higher at 65 cents per pound.

 

Midwest storms are delaying U.S. soybean plantings, leading to expectations that some soybean acreage won't be seeded while some planted crops will face a reduced yield potential, said John Kleist, a broker/analyst at Allendale Inc.

 

Spillover strength from inflationary markets, with a bounce in crude oil and weakness in the U.S. dollar, added support to send active contracts to exchange-imposed 70-cent upper daily trading limits, analysts said.

 

The market aggressively added risk premium as concerns over tightening U.S. inventories reignited speculative buying interest, Kleist said. These concerns rose because of the crop and acreage losses that could result from recent Midwest storms and another line of showers forecast to pound already flooded areas across the Midwest, he said.

 

The U.S. Midwest experienced heavy storms over the past weekend, producing flooding across a wide area of crop lands in the corn belt. The rains are delaying seedings as well as forcing the replanting of millions of acres from Iowa to Ohio, analysts said.

 

However, the problem with replanting or switching crops is that soybean seeds are scarce and in most cases out of the question, said William Wiebold, an agronomist at the University of Missouri.

 

The market has become very nervous about shrinking supplies because it doesn't have a supply cushion that can absorb drops in production, analysts added. Underlying support also was generated by concerns about a fragile truce between Argentina's striking farmers and the government.

 

The DTN Meteorlogix Weather forecast said Midwest rains will continue to bring flooding to the western corn belt. The chronic pattern of moderate to locally heavy rain in the corn and soybean belt of the Midwest shows no sign of easing in the 10 days through June 21.

 

"We expect a new round of heavy thunderstorms developing over the northern and central Plains and the western Midwest toward the end of the 10-day period. This likely means more flooding concerns and more concerns about crop condition for both corn and soybeans," Meteorlogix reported in its daily forecast.

 

On tap for Thursday, the U.S. Department of Agriculture is scheduled to release its weekly export sales report at 8:30 a.m. EDT. Trade estimates put soybean export sales at 300,000 to 500,000 metric tonnes. Soymeal sales are projected in a range of 100,000 to 200,000 metric tonnes, with soyoil sales expected in a 5,000-to-10,000-tonne range.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative fund-buying estimated at 7,000 lots.

 

 

SOY PRODUCTS

 

Soy products ended sharply higher, with active contracts briefly climbing to their respective exchange-imposed upper daily trading limits. Soymeal futures were catapulted higher on a combination of spillover strength from feed grains, potential soybean crop issues, inflationary buying and technical strength, analysts said. The market bolted to new contract highs, with advances accelerating after prices eclipsed resistance at last week's highs, analysts added.

 

Soyoil futures soared in unison with the rest of the soy complex, with the bullish influence of crude oil futures reigniting a speculative attraction to the market, said Kleist at Allendale Inc. Concerns about tightening soybean supplies added to the bullish theme.

 

The July oil share ended at 44.92% and the July crush ended at 75 1/4 cents.

 

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

 

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