July 13, 2007

 

CBOT Soy Review on Thursday: Sets new highs; adding risk premium

 

 

Chicago Board of Trade soybean futures ended sharply higher Thursday, rallying to new highs for the fourth day in a row as the market added risk premium to prices.

 

July soybeans settled 19 cents higher at US$9.10, and November soybeans finished 18 3/4 cents higher at US$9.41 1/2. August soymeal settled US$7.30 higher at US$253.70 per short tonne. August soyoil ended 19 points lower at 37.92 cents a pound.

 

Tighter old and new crop inventory estimates coupled with hot, dry weather conditions forecasted for the Midwest in the last part of July, forced traders to add premium to prices, said Brian Hoops, president on Midwest Market Solutions in Yanktonne, S.D.

 

A bullish technical trend added to the supportive mix, with speculative funds aggressively buying the market amid the risk that stressful weather could have on new crop supplies already forecasted at tight levels, Hoops added.

 

The market set new contract highs, with new crop futures receiving an added boost from market ideas prices will have to target higher levels in an effort to attract increased soybean plantings in the U.S. and South American next crop season, analysts added.

 

Weather once again took the lead over price action, with lingering concerns over northwestern Midwest crops suffering from dryness ahead of soybean's key pod filling stage of development, analysts added.

 

Longer range weather outlooks suggest the potential for 90-degrees Fahrenheit plus temperatures with below normal rains in the western Midwest late next week and beyond, analysts said.

 

The lack of aggressive selling resistance helped exaggerate the gains, with bearish traders unwilling to fight the bullish trend, a CBOT floor broker said.

 

Moderate drought conditions are now being reported from Minneapolis to northwestern Iowa, as well through increased parts of Indiana, Ohio, and Michigan as rainfall remains limited in theses areas, Cropcast Weather Services said in a forecast. Western parts of the U.S. corn-belt will remain mostly dry the next five days, but eastern areas could see some help, Cropcast reports.

 

U.S. Department of Agriculture estimated 2007-08 soybean ending stocks at 245 million bushels, down 75 million from June. USDA trimmed 2006-07 ending stocks by 10 million bushels to 600 million.

 

In pit trades, JP Morgan, Term Commodities, Iowa Grain and RJ O'Brien each bought 500 November, Man Financial and UBS securities each bought 400 November. Sellers were lightly scattered among various commission houses. Speculative fund buying was estimated near 7,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended higher across the board, setting new contract highs in unison with soybeans. Soymeal futures propelled on a combination of spillover from soybeans, soymeal/soyoil spreading amid concerns over smaller new crop soybean inventories, analysts said. Supportive USDA data showing stronger-than-expected soymeal disappearance and technical momentum aided the higher tonnee as well, analysts added.

 

Soyoil futures ended higher across the board, carving out new contract highs in unison with soybeans. Supportive momentum from soybeans and bullish fundamental outlooks for global vegoils served as an underpinning theme, analysts said. However, scattered profit taking near session highs and soymeal/soyoil spread provided pressure to cap upside movement and trim advances, traders added.

 

July oil share ended at 42.66% and the July crush ended at 63 1/2 cents.

 

In soymeal trades, Speculative fund buying was estimated near 3,000 lots, with ADM Investor Services buying 500 December, Penson GHCO a buyer of 400 December, and Iowa Grain and UBS Securities each buyers of 300 December.

 

In soyoil trades, Fimat bought 500 December, and Bunge Chicago bought 400 August. Fimat and Iowa Grain each sold 400 December, and Penson GHCO sold 800 December. Speculative funds were estimated buyers of near 2,000 lots.