July 31, 2009

 

CBOT Soy Review on Thursday: Soar on fundamentals, outside support

 

 

Soy futures at the Chicago Board of Trade took a large step forward Thursday, soaring to 3-week highs on bullish fundamentals and outside market support.

 

CBOT August soys ended 70 3/4 cents, or 6.7%, higher at US$11.28 1/4, and November soys finished 55 cents, or 6%, higher at US$9.71. In pit trades, speculative fund buying was estimated at 6,000 lots in soys, 1,000 lots in soymeal and 3,000 lots in soyoil.

 

December soymeal ended US$14.80 higher at US$296.80. December soyoil finished 190 points higher at 35.68 cents per pound.

 

Speculative-led buying fueled the market's upward charge, with strong export demand in a tight supply situation serving as the spark to ignite the gains, analysts said.

 

Export sales was the dominant fundamental factor, a reflection that prices had drifted low enough to uncover fresh overseas demand, said Don Roose, analyst with U.S. Commodities.

 

The exports provided the fundamental boost, while rallying crude oil, precious metals, equities and weakness in the U.S. dollar generated broad-based appeal to buyers.

 

Oversold technical conditions provided additional support, with traders encouraged by the market's ability to break out of a 3-week sideways trading range on technical charts.

 

Benign near-term weather conditions for developing crops was mildly bearish to new crop futures, but with extended 15-day to 30-day weather models pointing toward a potential heat ridge forming in the central U.S., traders were encouraged to add risk premium to the market.

 

Bull spreading was featured once again, with the tightness of old crop inventories allowing nearby contracts to extend the market's inverse differential heading into the August delivery period.

 

First notice day for CBOT August soy and soymeal contracts Friday is not expected to produce any deliveries, while soyoil notices have the potential to be large, based on ample U.S. supplies, analysts said.

 

Analysts expect no deliveries against CBOT August soy and soymeal contracts on first notice day. Soyoil delivery notices are expected in a range of 2,000 to 6,000 contracts.

 

USDA announced private export sales of 1.92 million metric tonnes of soys for delivery to China. Of that total, 1.8 million tonnes were for delivery in the 2009-10 marketing year and 120,000 tonnes are for delivery in the 2008-09 marketing year.

 

 

Soy Products

 

Soy product futures ended sharply higher, up in unison with the strong gains in soys. Soymeal futures were energized by speculative buying amid tight inventories and strong export demand.

 

Soyoil futures soared as well, buoyed by solid demand, spillover support from surging crude oil futures and broad-based speculative buying.

 

December oil share was 37.55%, while the November/December soy crush ended at 74 1/2 cents.