July 11, 2007

 

CBOT Soy Review on Tuesday: New highs on technical buys, weather concerns

 

 

Chicago Board of Trade soybean futures rallied Tuesday, propelling to new contract highs on speculative buying associated with longer range weather outlooks and technical momentum.

 

July soybeans settled 19 cents higher at US$8.89. November soybeans finished 18 1/2 cents higher at US$9.20 1/2. August soymeal settled US$7.00 higher at US$244.90 per short tonne, while August soyoil ended 33 points higher at 37.84 cents a pound.

 

The market is pretty concerned about drier weather in the northwestern Midwest, particularly in a year when every bushel of production will be counted on to keep new crop inventories at comfortable levels, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

The market effectively added risk premiums to prices, as moisture deficits in Minnesota, parts of Iowa and South Dakota are raising concerns with heat expected to return to the region in the 11 day to 15 day period, analysts said.

 

The market was also buoyed by strong upside technical momentum, with lingering concerns over smaller 2007 acreage and weather conditions heading into the critical pod-filling stage of development underpinning features, analysts said.

 

Speculative buying was a featured attraction, with outlooks for the U.S. Department of Agriculture to project tightening new-crop supplies in Thursday's supply and demand report adding to the bullish tonnee, analysts added.

 

The ability of new November futures to hold firmly above the US$9.00 level attracted technical buyers, with sellers reluctant to step in front of the upward moves, CBOT traders said. Bullish momentum fueled upside movement, with pre-placed buy stops activated once futures moved to new highs, a CBOT floor trader said.

 

Rains have been very limited in recent weeks across the northwestern Midwest, including Minnesota, central and far western Iowa, northeastern South Dakota and eastern Nebraska, Cropcast Weather Services said in a forecast. Ongoing drier-than-normal conditions during the next 10 days or more across these areas should allow moisture deficits to persist in at least 1/4 of the Midwest corn-belt, Cropcast said.

 

A lack of heat in the near term will limit any risks, but forecast models are starting to suggest the risk for another round of heat from very late in the 10-day period into the 11-15 day period for these sections of the belt. Readings could top out in the upper 90 degrees to 100 degrees Fahrenheit, Cropcast said.

 

In pit trades, JP Morgan, Fimat, and Penson GHCO each bought 500 November, Rand Financial bought 600 November, and Shatkin/Arbor bought 400 November. ADM Investor Services and Fortis each sold 300 November, FCStonnee sold 400 November. Speculative fund buying was estimated at 6,000 contracts.

 

 

SOY PRODUCTS

 

Soy product futures rose in unison with soybeans. Soymeal futures soared higher, with nearby contracts trading to their highest levels since late February, and new crop months setting contract highs. The market fed off bullish technical momentum and lingering concerns over tighter new crop soybean supplies in the 2007-08 marketing year, analysts said.

 

Soyoil futures rallied to new contract highs, buoyed by spillover from soybeans, palm oil and crude oil futures, analysts said. The market carved out new highs, but still lost some product share to soymeal on adjustments in the soyoil/soymeal spread relationship, analysts added.

 

July oil share ended at 43.54% and the July crush ended at 63 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, speculative funds net buyers on the day.

 

In soyoil trades, buyers and sellers were scattered among various commission houses, with speculative funds estimated buyers of 3,000 lots.