August 1, 2007

 

CBOT Soy Review on Tuesday: Up; adds premium on weather, crop worries

 

 

Chicago Board of Trade soybean futures ended higher Tuesday, adding risk premium amid hotter, drier Midwest weather outlooks and declining crop ratings.

 

August soybeans settled 11 1/4 cents higher at US$8.34, and November soybeans finished 9 3/4 cents higher at US$8.57 1/2. August soymeal settled US$2.70 higher at US$215.60 per short tonne. August soyoil ended 36 points higher at 37.76 cents a pound.

 

Weather forecasts confirming the Midwest will not see any appreciable rain over the next 10 days served as the catalyst for the gains, as smaller 2007 acreage leaves little room for error for crops in their key yield development stage, said Tim Hannagan, analyst with Alaron in Chicago.

 

The crop is moving into its critical yield stage, so it's make or break time for soybean yields, and hot, dry weather is not constructive for adding yield in the soybean crop, he added.

 

Meanwhile, technical buying was featured in quiet trade, with futures challenging the upper end of a weeklong trading range as well as its 50-day moving average amid ideas recent declines were a bit overdone, traders said. Otherwise, the market continued to trade in a sideways pattern, awaiting definitive news on yield potential, traders added.

 

Nevertheless, with 51% of the U.S. soybean crop in its key pod-filling stage and the remaining 49% of the crop moving into the stage during the next couple of weeks, weather is the key driver of prices at this point, a CBOT floor analyst said. The market is very sensitive to weather, and with crop ratings down for the fourth week in a row, analysts have begun to speculate if the U.S. will produce trendline yields, he added.

 

However, some private forecasters report a chance for rain showers to move through the Midwest early next week, and that provided mild pressure to cap upside potential, traders added.

 

The DTN Meteorlogix forecast said rainfall chances for the Midwest have been scaled back. High temperatures in the upper 80s to middle 90s Fahrenheit along with only some light showers on Thursday and some light to moderate showers Sunday will deplete soil moisture and cause some increase in stress to soybeans. Hardest-hit areas will be in driest sectors of southwestern Minnesota and eastern South Dakota.

 

Both Monday midday and Tuesday overnight releases of the U.S. weather forecast model suggest a renewal of the July ridge west/trough east upper-air pattern into early August. This implies a very warm to hot and mostly dry weather pattern across the central U.S. Forecast models had implied a change in the pattern during the past few days, but this is not a high likelihood in the latest analysis, Meteorlogix reports.

 

In pit trades, buyers and sellers were lightly scattered among various commission houses, with speculative funds estimated buyers of 3,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures propelled higher in step with advances in soybeans. Soymeal futures fed off the price strength in soybeans to produce a higher close. Light technical buying and lingering worries over tighter new-crop soy supplies served as underpinning features, analysts said.

 

Soyoil futures rallied with the rest of the soy complex. Soyoil was buoyed by spillover from soybeans and supportive influence of strong price gains in crude oil futures, analysts said. Technical buying, with futures targeting the upper end of a recent range attracted speculative interest, analysts added.

 

August oil share ended at 46.68% and the August crush ended at 55 1/2 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 2,000 lots.

 

In soyoil trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 2,000 lots.