July 12, 2006

 

CBOT Soy Review on Tuesday: Ends up, crop ratings, weather underpin

 

 

Chicago Board of Trade soybean futures ended moderately higher Tuesday, adding risk premium amid declining crop condition ratings and worries over the potential for hot temperatures to linger in the western Midwest.

 

July soybeans ended 4 cents higher at US$6.07, November soybeans finished 2 3/4 cents higher at US$6.32 1/2, December soymeal settled US$1.00 higher at US$179.90 a short tonne, while December soyoil ended 14 points higher at 28.40 cent a pound.

 

The ratings drop and weather served as the catalysts for the advances, but the market failed to sustain its lofty 6-month highs, as commercial selling and a reluctance of traders to add to much premium ahead of soybean's critical growing period limited upside movement, analysts said.

 

There remains less urgency to build weather premium in the market, but with speculative short covering, and spillover strength from wheat and corn aiding the firm tonnee, futures remained firmly underpinned, said a CBOT commission house broker.

 

Nevertheless, weather continues to be the central focus of market, with speculation of a moisture blocking ridge lingering in the Midwest through soybeans critical August pod-filling stage of development provides longer-term concerns to keep prices underpinned, traders added.

 

Rain showers currently moving through the Midwest will linger in the eastern Midwest, with areas west of Des Moines, Iowa, expected to remain dry through the end of the week, said Mike Palmerino, meteorologist with DTN Meteorlogix Weather Services.

 

The western Midwest has potential for hot temperatures in the mid to upper 90 degree Fahrenheit heading into the weekend, with the absence of any widespread rain seen for the western belt in the next week to 10 days, Palmerino said. The hot temperatures may break in the western belt next week as cooler air moves down through the Great Lakes and pushes the heat into the Great Plains, but not much rain is seen accompanying the moderating temperatures, he adds.

 

Meanwhile, light position squaring ahead of Wednesday's supply and demand reports managed to take some of the edge off prices. The U.S. Department of Agriculture's supply and demand report is scheduled to be released Wednesday at 8:30 a.m. EDT. The average of analysts' estimates peg 2005-06 U.S. soybean ending stocks at 560 million bushels, down 10 million from June's forecast. The estimates ranged between 530 million and 576 million bushels. The average of analyst estimates pegged 2006-07 marketing year ending stocks at 587 million bushels, down from the June forecast of 655 million bushels. The estimates ranged from 545 million to 649 million bushels.

 

In pit trades, Fortis bought 700 November, Man Financial bought 600 November, ABN Amro, Fimat, JP Morgan and Merrill Lynch each bought 500 November.

 

On the sell side, Calyon Financial sold 1,200 November, Tenco sold 1,000 November, ADM Investor Services and FCStonnee each sold 800 November, JP Morgan and RJ O'Brien each sold 500 November. Speculative funds were net buyers on the day.

 

South American soybean futures ended higher, with the July futures settling 2 1/2 cents higher at US$6.42 1/2.

 

 

SOY PRODUCTS

 

Soy product futures ended higher, in step with the supportive theme in soybeans. Soymeal remains a follower of soybeans, as the absence of fresh fundamental influences fails to provide price directives.

 

Soyoil ended on firm footing, but off the contract highs achieved earlier in the session. The market scaled back advances in tune with soybeans' retracement, but remains underpinned by the supportive strong long-term demand prospects for biodiesel, traders said.

 

July oil share ended at 44.06%, and the July crush ended at 75 cents.

 

In soymeal trades, JP Morgan bought 1,100 December, Fimat bought 500 December and Tenco bought 300 December. Sellers were scattered among various commission houses. Speculative funds were net buyers of between 1,000 and 2,000 lots.

 

In soyoil trades, O'Connor bought 1,500 December, Bunge Chicago bought 700 August, and Man Financial bought 700 August and 700 December. Sellers were scattered among various commission houses. Speculative funds were estimated buyers of between 3,000 and 4,000 contracts on the day.