July 7, 2007

 

CBOT Soy Review on Friday: Rallies; adding weather premium to prices

 

 

Chicago Board of Trade soybean futures ended higher Friday, bounding toward the upper end of a recent trading range as the market added weather premium to prices.

 

July soybeans settled 10 1/4 cents higher at US$8.64 3/4, and November soybeans finished 9 1/2 cents higher at US$8.96. July soymeal settled US$1.00 higher at US$233.90 per short tonne. July soyoil ended 45 points higher at 37.13 cents a pound.

 

The market has drawn the conclusion that heat and dryness in the western Midwest is enough of a concern that raises the level of risk for soybean crops looking forward, said Tim Hannagan, analyst with Alaron Trading in Chicago.

 

Weather models suggest the western Midwest will turn dry after a heat dome clears the area Tuesday and that raises the threat of a two-week cycle of dryness from the western Midwest, Hannagan added.

 

The market was respectful of potential weather concerns, as smaller 2007 U.S. soy acreage leaves little margin of error amid a tight projected 2007-08 balance sheet, analysts said.

 

Otherwise, the market had few other directives, but technically motivated buying, and the need to buy 2008 acres remained underpinning forces to keep a floor under prices, analysts added.

 

Looking ahead, traders are anticipating a bullish supply and demand report from the U.S. Department of Agriculture next week, but Monday the market will look for confirmation of supportive weather outlooks to determine if prices will continue their climb, Hannagan added.

 

The DTN Meteorlogix forecast calls for a mixed weather pattern in the Midwest during the weekend. Temperatures will climb into the mid-90s Fahrenheit in western and northwestern areas, while staying generally in the 80s Fahrenheit from eastern Iowa east to Ohio. This two-way weather pattern will stress crops in western and northwestern Iowa, eastern Nebraska, Minnesota and South Dakota.

 

Meanwhile, central and eastern Iowa on east will have warm but not hot temperatures. Much of the high-production area of central and eastern Iowa through most of Illinois has had beneficial rainfall during the past two weeks; thus, soybean flowering will have very little weather stress, Meteorlogix reports.

 

The six-to-10-day weather outlook calls for a notable ridge west/trough east upper-air configuration in the central U.S. This pattern will keep mostly above normal temperatures and below normal rainfall in place over the western half of the Midwest. As a result, crops will undergo continued stressful conditions from central Iowa west through mid-July, Meteorlogix forecasts.

 

In other news, private analytical firm Informa Economics on Friday pegged 2007-08 U.S. soybean yield at 43.0 bushels per acre with a crop of 2.719 billion bushels, traders said. That compares to the USDA's June yield estimate of 41.5 bushels per acre and production estimate of 2.745 billion bushels.

 

In pit trades, buyers and sellers were lightly scattered among various commission houses, with ADM Investor Services a seller of 400 November. Speculative funds were estimated buyers of 1,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended higher across the board Friday. Soyoil futures were the upside leader of the products, with spillover support from soybeans, overnight strength in Malaysian palm oil and price strength in crude oil futures lending support, analysts said. Technical buying added to the upward tonnee, with bullish long range demand prospects and commercial buying an underpinning force in the market, analysts added.

 

Soymeal futures ended higher, up in unison with price gains in soybeans. The market fed off soybean's bullish theme, with concerns over tightening new crop supplies a supportive feature, analysts said. Nevertheless, the market lost product share, succumbing soyoil/soymeal spreading, analysts added.

 

July oil share ended at 44.25% and the July crush ended at 58 1/4 cents.

 

In soymeal trades, Fimat bought 400 December, and RJ O'Brien sold 600 December. Speculative funds were light net buyers on the day.

 

In soyoil trades, Bunge Chicago bought 500 August and 300 December, JP Morgan bought 300 December. Bunge Chicago sold 300 December and UBS Securities sold 300 August. Commercial firms and speculative funds were both estimated buyers of 1,000 lots each.