August 9, 2007

 

CBOT Soy Review on Wednesday: Rallies again on technicals, crop concerns

 

 

Chicago Board of Trade soybean futures rallied once again Wednesday, climbing to 2 1/2-week highs on bullish technical chart activity and weather concerns for the southern soybean crop belt.

 

August soybeans settled 16 1/2 cents higher at US$8.55, and November soybeans finished 15 1/4 cents higher at US$8.78. August soymeal settled US$4.30 higher at US$230.30 per short tonne. August soyoil ended 50 points higher at 37.22 cents a pound.

 

The market propelled higher, with crop concerns due to heat and dryness in the southern Midwest and Delta serving as the fundamental back drop for the gains, analysts said. However, technicals played a key role in the bounce, with the ability of active contracts to push through overhead resistance levels accelerating the advances, analysts added.

 

Uncertainty surrounding yield and production prospects heading into Friday's crop report coupled with spillover support from a surge to new highs in wheat futures helped keep selling interest limited as well, traders said.

 

The ability of the most active November futures to propel above key 50-day moving average uncovered pre-placed buy stops, and with reports of triple-digit temperatures in the southern soybean belt, futures easily broke out of a 2- week trading range, a CBOT broker said.

 

The DTN Meteorlogix Weather forecast said hot, dry weather is covering the southern Midwest and Delta. Temperatures are averaging above to well above normal. Highs of 100 degrees Fahrenheit are reported in southern Illinois, far south Indiana and Kentucky, as well as in portions of the Delta. The hot and dry weather is threatening to produce significant crop losses in soybeans, due to the occurrence of this extreme heat coming as soybeans move into their critical reproductive phase, Meteorlogix reports.

 

The outlook for next week continues to indicate a mainly hot, dry weather pattern across the central U.S. Upper-atmosphere high pressure will move into the central and eastern Midwest by Wednesday or Thursday of next week. Soybeans in areas that still need rain will be stressed, Meteorlogix said.

 

On tap for Thursday, the U.S. Department of Agriculture is scheduled to release its weekly export sales report at 8:30 a.m. EDT. Analysts predict old-crop soybean sales of 100,000 to 200,000 metric tonnes. New-crop sales are seen in a range of 200,000 to 400,000 metric tonnes. Soymeal sales are seen in the 50,000 to 175,000 metric-tonne range, and soyoil sales are pegged to fall within a range of none to 30,000 tonnes.

 

USDA is scheduled to release its August crop production and supply and demand reports Friday at 8:30 a.m. EDT. The average of analysts' estimates pegged 2007 soybean production at 2.653 billion bushels, up from the July figure of 2.625 billion. The average was from a range of 2.550 billion to 2.722 billion bushels. Ending stocks were pegged at 589 million bushels from a range of 575 million to 603 million.

 

In pit trades, ADM Investor Services bought 1,000 November, Fimat bought 700 November, Man Financial bought 400 November and UBS Securities bought 300 November. Sellers were lightly scattered among various commission houses. Speculative fund buying was estimated at 5,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures rose in unison with soybeans, with technically inspired buying featured attractions. Soymeal futures rallied to 2 1/2-week highs in step with soybeans, with the ability of active contracts to breach major moving average resistance uncovering fresh buying interest, analysts said. Traders reported the presence of end-user buying, while helped propel prices as well, analysts added.

 

Soyoil futures rose in unison with the rest of the complex, but continued to lose product share to soymeal. Analysts said soybean supplies have a greater impact on global soymeal inventories, leading meal to move more closely with soybean price action. Nevertheless, soyoil still satisfied a near-term upside objective of filling a chart gap, as technical momentum and strength in world vegoils markets remain underpinning features, analysts added.

 

August oil share ended at 44.69% and the August crush ended at 61 cents.

 

In soymeal trades, JP Morgan bought 700 December and 500 March, Bunge Chicago and Rosenthal bought 500 December. Rand Financial sold 600 December, and JP Morgan sold 400 September. Speculative fund buying was estimated at 2,000 lots and commercial buying was pegged at 1,000 lots.

 

In soyoil trades, Fimat and Man Financial each bought 500 December, with sellers scattered among various firms. Speculative fund buying was estimated at 3,000 lots.