August 25, 2009

 

CBOT Soy Review on Monday: Extend rally on frost concern, robust demand

 

 

Soy futures on the Chicago Board of Trade rallied a second consecutive day Monday, reaching the highest levels in more than a week on robust demand for dwindling supplies and speculation that an early frost may curb harvest.

 

November soy futures rose 34 1/2 cents to US$10.07 1/2, the highest closing price since US$10.18 3/4 on Aug. 13. September soys rose 57 cents to US$10.80.

 

Soy development is as much as one week behind normal in the western Midwest and as much as two weeks behind in the eastern half, said David Smoldt, vice president of operations for FCStonnee LLC, in Des Moines, Iowa.

 

An unusually early frost would end the growing season prematurely, "taking a toll" on soy yields, Smoldt said. That would exacerbate already-tight soy supplies globally, he said.

 

"We can't afford to have a hiccup until the next South American crop" early next year, Smoldt said. "You get a frost, you're probably looking at US$10.50 to US$11.00" for November soys.

 

The nation's soy stocks will total 110 million bushels at the close of the 2008-09 marketing year Aug. 31, according to a U.S. Department of Agriculture estimate.

 

That would be down 46% from the previous year and the lowest ending stocks since 1976-77.

 

A wet spring pushed back farmers' planting efforts, and corn and soy development continued to lag this month.

 

As of Aug. 16, 72% of the U.S. soy crop was setting pods, below the average of 85%, according to the U.S. Department of Agriculture.

 

The USDA is scheduled to release its next weekly crop progress report Monday afternoon.

 

Export demand remains firm, and domestic processors are raising their bids for soys to attract more supply, Smoldt added. China, whose soy crop was hit by drought, has been an active buyer of U.S. soys in recent weeks.

 

Some 8.9 million hectares of China's farmland is still facing drought-like conditions, the State Flood Control and Drought Relief Headquarters said on its Web site Monday.

 

The soy harvest in Heilongjiang, China's biggest soy-producing province, is likely to fall more than 20% on year, said Yu Haifeng, an analyst with Tianqi Futures.

 

CBOT soy meal and soy oil futures joined the rally in soys and also reached the highest levels in more than a week.

 

December soy meal futures rose US$9.90 to US$299.90 per tonne, the highest closing price since US$306.50 on Aug. 13. December soy oil futures rose 0.78 cent to 37.72 cents per pound, the highest since 37.79 cents on Aug. 14.

 

Commodity funds bought an estimated 4,000 soy contracts, 1,000 soymeal contracts and 1,000 soyoil contracts, CBOT floor sources reported.