June 30, 2007

 

CBOT Soy Review on Friday: Soars on smaller USDA acreage forecast

 

 

Chicago Board of Trade soybean futures ended sharply higher Friday, soaring on speculative buying amid bullish long range supply and demand outlooks following a surprising cut to U.S. Department of Agriculture's U.S. soybean acreage forecast.

 

July soybeans settled 40 1/4 cents higher at US$8.50, and November soybeans finished 39 1/2 cents higher at US$8.81 3/4. July soymeal settled US$11.00 higher at US$229.20 per short tonne. July soyoil ended 106 points higher at 36.63 cents a pound.

 

"The acreage number projects a much tighter 2007-08 U.S. soybean balance sheet, and not only forces the market to buy South American acres but forces the market to compete with corn for acres in 2008," said Anne Frick senior oilseed analyst with Prudential Financial in New York.

 

The market briefly soared to their upper 50-cent trading limits on the tighter supply outlook, with traders adding premium amid the risks associated with weather on the crop and the need to ration demand longer term, analysts said. Profit taking, spillover weakness from corn and commercial selling managed to apply mild pressure to pull futures off their highs near midday, traders said.

 

Right now the market is "priced for perfection" meaning it can't afford to lose a bushel, particularly with 2007-08 ending stocks threatening to dip below the soybean industry's comfort level of 200 million bushels, said Dan Basse, president AgResource Co in Chicago.

 

Weather will be watched closely moving forward, as any perceived threat to the 2007 crop in an already tight new crop outlook, could lead November prices to the US$9.20 to US$9.40 price range, Basse said.

 

Bullish longer term outlooks continued to dominate market opinions with analysts saying the adjustment in acres could accelerate soybean prices to new cyclical highs amid the more bullish 2007-08 balance sheet.

 

USDA reported 2007 soybean acreage at 64.081 million acres, down 15% from 2006's record high. The acreage figure is the lowest planted area since 1995. The acres data is also down 3.059 million acres from the March intentions estimate of 67.140 million, as well as below the average survey estimate of 67.838 million.

 

Meanwhile, June 1 stocks in all positions were reported at a record 1.09 billion bushels, up 10% from June 1, 2006. Indicated disappearance during the March-May period was 696 million bushels, up 3% from last year.

 

The DTN Meteorlogix forecast said the next five days in the Midwest will feature variable temperatures and more showers from the Mississippi Valley east. Some hot weather, with temperatures in the 90s Fahrenheit, will creep into the northwestern Midwest - northern Iowa, Minnesota, eastern Nebraska and eastern South Dakota - but this will not be an extreme round of hot weather, Meteorlogix added.

 

In pit trades, Tenco, RJ O'Brien and Kottke each bought 500 November, JP Morgan bought 300 July and Fimat bought 400 November. ADM Investor Services and Fimat each bought 700 November, Citigroup, Penson GHCO, RJ O'Brien and Rand Financial each sold 500 November. Speculative fund buying was estimated at 6,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended sharply higher in unison with soybeans. The prospect of tightening soybean supplies was felt in the products, as processors after dealing with large caches of bean supplies are gearing up for sharp price premiums, Basse said.

 

Soyoil futures soared to new contract highs, and its highest level since June 1984 on continuation charts amid tighter supply forecast and spillover strength from palm oil and crude oil futures. Soymeal futures spiked higher with soybeans, managing to rebound from a two-week down turn in prices, analysts said.

 

July oil share ended at 44.42% and the July crush ended at 57 1/4 cents.

 

In soymeal trades, Tenco bought 1,000 December and Man Financial bought 500 December. RJ O'Brien sold 500 December. Speculative fund selling was estimated at 3,000 lots.

 

In soyoil trades, Bunge Chicago bought 1,000 December, Fimat and Man Financial each bought 500 December, UBS Securities bought 400 December and 400 January, and Fortis bought 300 December. Bunge Chicago sold 1,100 December, Fimat sold 1,300 December, Fortis and RJ O'Brien each sold 400 December, and Citigroup sold 300 December. Speculative fund buying was estimated at 5,000 lots.