August 19, 2009

 

CBOT Soy Review on Tuesday: Three-day slide ends with help from crude

 

 

Soy futures on the Chicago Board of Trade ended higher for the first time in four sessions, bouncing back from nearly three-week lows as a rally in crude oil spurred short covering in the soy complex.

 

November soy futures rose 4 1/2 cents to US$9.59 after falling during overnight trading to US$9.42, the lowest intraday price since US$9.13 3/4 on July 30. September soys rose 7 1/2 cents to US$9.95 1/2 a bushel.

 

Oil futures surged 3.6% while U.S. stocks gained and the dollar fell, providing the impetus for renewed buying in the soy complex, said Bill Nelson, an analyst with Doane Agricultural Services in St. Louis.

 

Over the previous three sessions, November soys dropped 89 1/2 cents, or 8.6%.

 

"We had a major correction," Nelson said. "But we still have very strong [export] demand for U.S. soys over the next six months."

 

The jump in crude futures, Nelson said, signaled stepped-up speculator interest across many commodities. Oil is "a barometer of investor interest in commodities, of money flows in and out of the commodity sphere," Nelson said.

 

Delayed crop development in parts of the Midwest remains an underpinning factor for soy prices, said Vic Lespinasse of GrainAnalyst.com. Crops behind schedule may be vulnerable to an early frost that halts the growing season.

 

On Monday, the U.S. Department of Agriculture estimated 72% of the U.S. soy crop had reached the pod-setting stage, behind the five-year average of 85%.

 

Soys plunged in previous sessions on expectations that widespread rains across the Midwest this week will aid dry areas and boost harvest prospects.

 

Scouts traveling across Nebraska on Tuesday on one route of the Pro Farmer Midwest Crop Tour reported "pretty good" corn and soy crops.

 

"Overall, the crops look good, with pod fill better in soys," said Chip Flory, editor of the Pro Farmer Newsletter and director of the western portion of the tour. On the eastern leg of the tour, corn and soy fields north and west of Indianapolis showed signs of stress from dry weather.

 

Generally favorable weather and crop conditions suggest the U.S. soy harvest may be even larger than the record 3.2 billion-bushel crop the USDA projects, Nelson said. That probably means more downside for soy futures, he said.

 

"Quite logically, you could start ratcheting up production estimates," Nelson said. November soys may decline toward US$9 over the next several weeks "if weather continues to behave," Nelson said.

 

CBOT soy meal and soy oil futures also ended higher in step with soys. December soy meal futures rose US$2.30 to US$284.20 a tonne after declining earlier to US$278, the lowest intraday price since US$277 on July 29. December soy oil futures rose 0.07 cent to 36.55 cents a pound. Commodity funds bought an estimated 3,000 soy contracts and 1,000 soymeal contracts, CBOT floor sources reported.