August 24, 2006

 

CBOT Soy Review on Wednesday: Rallies on sector-wide strength

 

 

Soy complex futures at the Chicago Board of Trade ended rallied Wednesday on fund buying and gains seen across the CBOT agriculture sector.

 

Most-active November soybeans settled 4 1/4 cents firmer at US$5.66 1/2 a bushel. December soyoil settled up 3 points at 26.09 cents a pound. December soymeal rose US$1.50 to US$162.60 a short tonne.

 

Funds were net buyers of about 4,000 contracts, having entered the market after being absent for about two days.

 

"For the past two days you had a little mini-battle between bulls and bears at this US$5.60 area, basis November, where open interest went up Monday and Tuesday (after closing weaker), so I'd say we had a little short covering going on (Wednesday). This is a potential bubble in a bear," said one long-time grain analyst.

 

Soybeans traded firmer Wednesday, supported by news out of a crop tour that soybean pod counts east of the Mississippi River were less than expected. "We've already priced in big crops, so now the only surprises will be bullish ones," said one analyst, explaining that the market is prepared for bigger crops, but not for a reducing in size.

 

On the western leg of the 2006 John Deere/Pro Farmer Midwest crop tour crop, scouts said Wednesday that soybeans were seen in good shape as well, according to scouts along one tour route that's zigzagging across southwest Iowa. Soybean pod counts in a 3-foot-by-3-foot area ranged from 936 to 1,624.

 

Soybean production in Illinois is expected to rebound sharply this crop year, versus 2005's drought-stricken harvest, say scouts on one route of the crop tour's eastern leg. Soybean pod counts in the same region of Illinois averaged 1,486.6 pods per square yard. The eastern leg participants will convene in Iowa City, Iowa, to compile final projections for all of Illinois.

 

Although soybeans saw a solid rally on Wednesday, a technical analyst reminds that bears remain in control of November futures. To reverse the trend, bulls need a close above US$5.75.

 

On Thursday, the Census bureau is scheduled to release the July crush report. A survey of analysts estimate the crush at 148.9 million bushels, rising from June's crush figure of 137.4 million bushels. The increase in the month-over-month figure in July is attributed one additional crushing day for the month and good crushing margins, according to the industry analysts.

 

Also on Thursday, the U.S. Department of Agriculture is set to release weekly exports sales. A survey of analysts estimate old-crop soybean business at 50,000 to 200,000 metric tonnes and new-crop at 400,000 to 700,000 tonnes.

 

Analysts note an undercurrent of chatter about production in other parts of the world being less than stellar. This has helped to stir the idea that perhaps the market is consolidating and base-building here at this level. With concerns about acreage reduction in Brazil and India, some bulls are looking at the very long-term in soybeans for possible supply disruptions.

 

Buyers in soybeans include Man Financial buying 1,000 November; Merrill Lynch, Kotte and JP Morgan each buying 300 November; O'Connor buying 500 November; Rand buying 1,000 November. Seller include Calyon selling 500 November. Term bought 1,000 September US$5.50 puts and spread 800 November-September.

 

 

Soy products

 

Soy products ended firmer, with soymeal gaining over soyoil.

 

Some unwinding of oil-meal spreads was evidenced Wednesday, with soyoil softer and soymeal firmer. By the session's end, though, soyoil managed to eke out light gains.

 

Thursday the U.S. Department of Agriculture is set to release weekly exports sales. A survey of analysts estimate old-crop soymeal business at 75,000 to 125,000 metric tonnes and new-crop at 50,000 to 150,000 tonnes. Soyoil sales are seen at zero to 20,000 tonnes.

 

In Thursday's Census Bureau report, analysts expect soyoil stocks at 3.063 billion pounds and soymeal stocks are estimated at 296,200 short tonnes.

 

In soymeal, Calyon and RJ O'Brein each bought 300 December. Sellers include Iowa Grain selling 300 December; JP Morgan selling 400 September; Prudential selling 300 December.

 

In soyoil, Bung bought 200 December; Fimat buying 100 December and 100 January. Sellers include Calyon, RJ O'Brien and Rosenthal each selling 100 December.