August 3, 2006

 

CBOT Soy Review on Wednesday: Speculative buys buoy amid weather, yield concerns

 

 

Chicago Board of Trade soybean futures ended Wednesday's session posting solid gains, buoyed by speculative buying amid weather concerns, technical support and worries over yield estimates.

 

August soybeans ended 8 1/4 cents higher at US$5.81 3/4, November soybeans finished 7 1/2 cents higher at US$6.01 1/4. December soymeal settled US$1.50 higher at US$168.60 a short tonne, while December soyoil ended 24 points higher at 27.63 cent a pound.

 

The trade staged a modest bounce from prior declines, managing to regroup. Outlooks for hot, dry conditions next week, talk of overdone declines and concerns private forecasters will project below trendline yields sparked upside movement, analysts said.

 

The theme was consistent, with advances accelerating once active contracts eclipsed overhead resistance, as weaker market shorts ran for cover, traders added.

 

There remains a general reluctance in the market to aggressively press prices beyond the lower limits of a 6-month trading range, particularly with the potential yield losses if heat and dryness persist through the crop's critical pod-filling stage, said a CBOT commission house broker. Generally light farmer selling in the cash market has limited pressure on the market as well, he added.

 

The market's focus is shifting to yield prospects, with the impact of August weather on crop yields keeping a level of support in the market. Private crop and yield forecasts are expected to flood the market heading into next week's U.S. Department of Agriculture production report. FCStonnee is expected to release its projections after 3:30 p.m. EDT on Wednesday, and Informa Economics is expected to release its projections Friday morning, analysts said.

 

Meanwhile, DTN Meteorlogix Weather Service said recent rainfall coverage and amounts were less widespread than previously indicated across the northern Midwest. The DTN Meteorlogix forecast calls for additional thunderstorms, concentrating in Iowa through northern Illinois and the Great Lakes.

 

During the next week to 10 days, there are signs that the subtropical high-pressure ridge that brought the recent heat wave to the central U.S. will re-strengthen. This projected resurgence of the hot weather indicates that another round of above-normal temperatures and below-normal rainfall for the entire Midwest is on the way, Meteorlogix reports.

 

Ahead of Thursday's USDA weekly export sales report, analysts forecast soybean commitments in a range of 150,000 to 400,000 metric tonnes. Soymeal sales are seen falling in a range of 80,000 to 135,000 metric tonnes and soyoil commitments are expected in a range of nothing to 6,000 tonnes.

 

In pit trades, Rand Financial bought 2,000 November, Man Financial and Tenco each bought 1,000 November, and FCStonnee, Calyon Financial, Citigroup and DT Trading each bought 400 November. Speculative fund buying is estimated at 6,000 contracts.

 

On the sell side, USA sold 500 November, Tenco sold 400 November, and Man Financial and JP Morgan each sold 300 November.

 

South American soybean futures ended lower, with the August futures settling 6 cents lower at US$6.26 1/2.

 

 

SOY PRODUCTS

 

Soy product futures ended higher across the board, up in unison with soybeans. Soymeal futures followed in the footsteps of soybeans, managing to bounce from Tuesday's contract lows.

 

However, concerns over ample nearby supplies limited upside potential, analysts said.

 

Soyoil futures were higher in tune with the rest of the soy complex, garnering additional support from speculative buying amid continued enthusiasm for future vegetable oil demand for biodiesel production, analysts said. Higher crude oil futures fed the supportive tonnee in the market, traders added.

 

August oil share ended at 45.16%, and the August crush ended at 72 3/4 cents.

 

In soymeal trades, buyers and sellers are scattered among various commission houses.

 

In soyoil trades, JP Morgan and Iowa Grain each bought 500 December, RJ O'Brien, UBS Securities and ADM Investor Services each bought 400 December, Man Financial and Tenco each bought 300 December. Speculative fund buying is estimated between 2,000 and 3,000 contracts.