June 28, 2006

 

CBOT Soy Review on Tuesday: Rallies on speculative, technical buying

 

 

Chicago Board of Trade soybean futures ended on firm footing Tuesday, bouncing back from Monday's declines on speculative buying attributed to weather concerns and technically motivated buying.

 

July soybeans ended 8 1/2 cents higher at US$5.78, November soybeans finished 9 cents higher at US$6.03 1/2, July soymeal settled US$1.20 higher at US$173.10 a short tonne, and December soyoil ended 70 points higher at 26.18 cent a pound.

 

Midday weather forecasts projecting warmer and drier weather conditions for the western Midwest provided a spark to lift prices to their highs, with technical buying coming onboard after active contracts pushed above resistance levels, analysts say.

 

The weather and unchanged crop ratings were supportive influences, but soybeans are a crop of August, leaving futures a speculative driven market, said a CBOT commission house broker. Oversold market conditions attracted buyers, with position evening ahead of Friday's crop reports and spillover strength from soyoil helping attract buyers as well, traders added.

 

The market had gotten a little cheap with a long growing season ahead, and with soyoil surging higher, the momentum spilled over to extend soybeans' recovery, said a CBOT commission house broker added.

 

This was consistent, with the most-active November futures filling in a chart gap left from Monday's sharp declines. The market rallied to double- digit gains down the stretch, before late profit taking surfaced to exhaust buying interest and stabilize the gains on the close.

 

Meanwhile, the DTN Meteorlogix forecast said temperatures to remain near to below normal through Wednesday in the western Midwest, followed by a warmer trend to near- to above-normal values by the end of the week. In the eastern Midwest, temperatures will remain near to below normal through Thursday, then trending to near- to above-normal values.

 

While temperatures will be generally favorable to Midwest crops, rainfall remains below normal over much of the western Midwest, and extending eastward into central Illinois. Through the end of June, rainfall will total mostly near to below normal, except for the far-eastern Midwest where near- to above-normal rainfall is expected. Meanwhile, temperatures will remain near to below normal as well, with the exception coming in the far-western Midwest (eastern Nebraska, western Iowa, eastern Kansas, eastern South Dakota), which will see normal to above-normal temperatures, Meteorlogix said.

 

In pit trades, Tenco bought 1,000 November, O'Connor bought 700 November, Rosenthal bought 500 November and Fimat bought 400 November.

 

On the sell side, Calyon Financial and Goldenberg Hehmeyer each sold 2,000 November.

 

South American soybean futures ended higher, with the July future settling 18 cents higher at US$6.09.

 

 

SOY PRODUCTS

 

Soy product futures bounced higher Tuesday, with soyoil the clear leader of upside movement in the soy complex. Soyoil futures catapulted to two-week highs, buoyed by speculative buying as the market propelled through meaningful resistance levels, traders said. The ability of the December contract to push above last week's high as well as its 10-, 20-, 40- and 50-day moving averages served as sparks to accelerate advances, traders said. Firm energy prices and ideas the market's recent declines were a bit overdone, added to the supportive theme.

 

Soymeal futures ended higher, in tune with soybeans, with light end-user buying helping support prices. However, the market continued to lose product share amid soyoil's sharp gains.

 

July oil share ended at 42.07%, and the July crush ended at 78 3/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses.

 

In soyoil trades, Rand Financial bought 2,000 December, Man Financial bought 800 December, Calyon Financial, RJ O'Brien, Refco, Tenco and Stern were all featured buyers as well. ADM Investor Services sold 400 August and JP Morgan sold 700 December. Commodity funds were estimated buyers of between 5,000 and 6,000 contracts.