August 4, 2009

 

CBOT Soy Review on Monday: Soar on dollar weakness; potential weather threat

 

 

Chicago Board of Trade soy futures ended sharply higher Monday, extending the previous week's rally on weakness in the U.S. dollar and the threat of hot, dry Midwest weather.

 

CBOT August soys ended 39 1/2 cents higher at US$11.73 1/2, and November soys finished 48 1/2 cents higher at US$10.30 1/2. In pit trades, speculative fund buying was estimated at 6,000 lots in soys, 1,000 lots in soymeal and 2,000 lots in soyoil.

 

December soymeal ended US$9.10 higher at US$309.60. December soyoil finished 248 points higher at 38.28 cents per pound.

 

A sliding U.S. dollar versus other major currencies served as a spark to promote fund buying throughout the commodity sector.

 

Speculative money flow was the featured attraction of the day, reflective of the broad-based gains seen across commodities, with weather concerns an added twist to keep buyers enthused, said John Kleist, broker/analyst with Allendale Inc.

 

Bullish fundamentals remained underlying drivers of the market, with tight old crop supplies, strong demand and the uncertainties of new crop production, factors keeping sellers on the run.

 

Weather forecasts calling for a ridge of high pressure to bring potentially stressful weather to developing soy crops in their critical pod filling stage was a wake up call for traders to price in risk premium, said Mike Zuzolo of Global Commodity Analytics & Consulting LLC.

 

Talk of a weak Indian monsoon added strength as well, with traders concerned that smaller Indian oilseed production will bring more business to U.S. shores. Reports of U.S. cash prices trading at a discount to Brazil added fundamental support as well, traders said.

 

Meanwhile, technically motivated buying was a key influence on prices, with advances accelerating once active contracts gapped above major moving average chart resistance in route to 7-week highs, said Kleist.

 

The DTN Meteorlogix Weather forecast calls for a turn to warmer to hot and drier weather in the 10-day period.

 

The U.S. Department of Agriculture will release its weekly crop-progress report at 4 p.m. EDT Monday. Analysts anticipate the percentage of soy crops rated in good to excellent to decline by 1 to 2 percentage points from the previous week.

 

 

Soy Products

 

Soy product futures leaped in unison with the price surge in soys. Broad based commodity buying served as the catalyst for the gains, with technically motivated buying an underlying feature.

 

Soyoil futures were energized by rallying crude oil futures, with the most active December contract rallying to its highest level since June 12. The December futures ended at session highs, touching its exchange imposed upper daily trading limits. Soymeal followed the lead of soys, but lost ground to soyoil on adjustments in meal/oil spreads, analysts said.

 

December oil share was 38.14%, while the November/December soy crush ended at 71 3/4 cents.