July 23, 2009

 

CBOT Soy Review on Wednesday: Firm in two-sided trade; short covering

 

 

Soy futures at the Chicago Board of Trade closed slightly higher and near mid-range Wednesday.

 

Short covering was featured, said Brian Hoops, market analyst with Midwest Market Solutions. Weather in the U.S. Corn Belt is still the trump card in the soy complex, he said. With nearly ideal growing conditions and a good-looking crop, overall, any will be capped, he added.

 

August soys closed up 4 cents at US$10.18 1/2 a bushel. New-crop November soys were up 3 1/2 cents at US$9.08 1/2.

 

The failure of November soys to score a fresh low this week or last week is somewhat encouraging to the bulls and could also prompt some short covering heading into the end of the month, said Hoops.

 

Scattered showers and thunder showers fell over the Corn Belt the past 24 hours. More of the same is in the forecast, especially for the eastern Corn Belt. Temperatures have been and will continue to be normal to below normal in the region.

 

The specter of China soon auctioning its soy stocks Thursday is also a negative fundamental in the soy complex futures at present. The government will sell 500,000 metric tonnes of reserve soys in the northeast producing areas Thursday. Traders believe the price set by the government will be much higher than what are local prices at present.

 

Traders will closely scrutinize Thursday morning's weekly USDA export sales data. Any fresh demand from China would provide the bulls with some fresh ammunition, amid recent scattered rumors of Chinese demand for U.S. soys.

 

Soy futures on the Dalian Commodity Exchange in China closed higher Wednesday as traders set up long positions in expectations the government will not lower soy sales prices at the government auction Thursday.

 

Technically, November soy prices are still in a five-week-old downtrend on the daily bar chart. The next upside price objective for the bean bulls is to push and close November prices above solid technical resistance at US$9.75 a bushel. The next downside price objective for the bears is pushing and closing prices below solid technical support at the July low of US$8.81 1/4 a bushel.

 

 

Soy Products

 

Soy product futures at the Chicago Board of Trade closed mixed Wednesday. Spreaders were seen selling the soy oil and buying meal, said an analyst.

 

December soy oil closed down 23 points at 35.22 cents a pound. December soy meal futures closed up US$0.90 at US$273.70 a tonne.

 

Soy oil futures will continue to closely track the crude oil futures, said Hoops. He said he looks for soy oil to be a laggard in the complex, while soy meal could be the leader on rallies.