July 29, 2009

 

CBOT Soy Review on Tuesday: Climb on short covering; oversold

 

 

Chicago Board of Trade soy futures bounced Tuesday, climbing on a short-covering rally amid oversold conditions.

 

CBOT August soys ended 33 1/4 cents higher at US$10.54 1/2, and November soys finished 20 1/2 cents higher at US$9.27. In pit trades, speculative fund buying was estimated at 5,000 lots in soys, and 1,000 lots each in soymeal and soyoil.

 

December soymeal ended US$7.10 higher at US$283.30. December soyoil finished 23 points higher at 34.53 cents per pound.

 

The market was buoyed by traders taking profits on short positions, as the absence of fresh news opened the door for a bounce based on oversold technical indicators, said Tim Hannagan, an analyst with Alaron Trading.

 

The inability of futures to take out last week's lows was a bullish technical sign to traders, and with crop ratings holding steady despite ideal weather conditions in recent weeks, the risk was in short positions, Hannagan said.

 

Tight old-crop supplies, lingering talk of Chinese export demand and strong South American cash prices provided additional support to pull buyers off the sidelines, a CBOT floor analyst said.

 

Despite an absence of crop-threatening weather conditions for soys, dry pockets in the western Midwest and the fourth coldest Midwest July in 118 years provide enough uncertainty to keep a floor beneath prices, Hannagan said.

 

The DTN Meteorlogix Weather forecast calls for very cool conditions this summer season to cover the central U.S. during the next five days. Daytime temperatures will be as much as 15 degrees Fahrenheit below normal in the northwestern Midwest through the central Plains. Crop stress will be minimal; however, the very cool weather will keep development of crops slow. Rainfall in the region should favor crops, except possibly in the northwest where totals could be lighter.

 

 

Soy Products

 

Soy-product futures rallied in unison with soys. Soymeal futures were the upside leader, bouncing on end-of-month short-covering and fundamental support from concerns about tight supplies.

 

Soyoil futures climbed with the rest of the soy complex, but lost product share on adjustments in the meal/oil spread.

 

December oil share was 37.89%, while the November/December soy crush ended at 76 cents.