August 31, 2006

 

CBOT Soy Review on Wednesday: Wheat strength floats soybeans

 

 

A strong wheat market and technical support levels helped soy complex futures at the Chicago Board of Trade end mostly with gains on Wednesday, with only soymeal slightly weaker.

 

Most-active November soybeans settled 4 3/4 cents firmer at US$5.55 3/4 a bushel. December soyoil settled up 45 points at 25.53 cents a pound. December soymeal was 10 cents down at US$161.60 a short tonne.

 

After a quiet, two-sided trade, soybeans rallied late in the session as fund buying swept up wheat and spilled over to soybeans. Although November soybeans broke support at US$5.50, there was no real follow-through selling and light technical-related buying helped the market bounce back prior to the wheat-inspired rally.

 

"Generally there's a lack of farmer movement and there's firmer basis levels," said Jerry Gidel, analyst at North American Risk Management Services.

 

Gidel also noted some rumblings "it's certainly not a groundswell" of concern that the lack of sun that has accompanied the recent rainy days in the Midwest has not benefited soybeans as it slows maturity. "But it's not like this going to be a disaster on bean yields," Gidel said.

 

DTN Meteorologix said the cooler, wetter weather is likely to stick around the Midwest for at least the next five days.

 

Deliveries against the September soybean contract are expected to be 500 to 1,000 contracts on Thursday's first notice day. There are some estimates as high as 2,000 contracts that might be delivered, but floor sources don't believe the first notice day deliveries will reach that high. With soybeans traded about "a penny to a 1 1/2 cents better than fully carry," that will likely limit deliveries against the contract, one cash-connected floor broker said.

 

The U.S. Department of Agriculture is scheduled to release its weekly export sales report Thursday. Traders estimate old-crop sales at 25,000 to 100,000 metric tonnes and new-crop soybean sales at 400,000 to 600,000 tonnes.

 

"There's been talk of demand with the break in prices we have we would be competitive with Brazil, so there's hope we'll have a decent report tomorrow," a grain analyst said.

 

In other news, the Brazilian government is considering a measure to allow the country's farmers to swap illegal transgenic soy seeds for legalized transgenic soy seeds, said the country's National Commodities Supply Corp., or Conab, on Wednesday. While contraband seeds account for a large percentage of Brazil's seed market, producers who use illegal seeds are not technically eligible for financing or rural insurance from state-owned banks such as Banco do Brasil, which offer credit lines with some of the country's lowest interest rates.

 

An unfavorable exchange rate has hurt many Brazilian farmers and there are expectations that Brazilian soy acreage will fall in the coming crop year. Several analysts suggested that one of the reasons why November soybeans aren't falling significantly under US$5.50 is to curb a wholesale withdrawal from the market by the Brazilian farmer. "I don't think people want Brazilian acreage down (sharply) so it's holding enough to just to keep it together," he said.

 

Soybean buyers include ADM and Bunge each buying 200 November; ABN Amro buying 400 November; Man Financial buying 300 November. Sellers include O'Connor and Calyon each selling 300 November; Fimat selling 400 November; JP Morgan selling 200 November; RJ O'Brien selling 400 November.

 

 

Soy products

 

Soymeal and soyoil ended mixed, with soymeal slightly weaker and soyoil firmer.

 

Products saw a two-sided trade with funds light sellers in each. As crude oil rebounded soyoil followed suit, as speculators bought up the contract for its biodiesel properties.

 

"Crude's move back over US$70 did help, plus soyoil regained its footing as Malaysian palm oil did," a grain analyst said. Deliveries against the September soymeal contact are estimated around zero-50 contracts, while September soyoil deliveries range widely between 500 and 5,000 contracts.

 

For USDA's export sales report, traders estimate sales of 50,000 to 125,000 tonnes for old-crop and 75,000 to 125,000 tonnes for new crop. Soyoil sales are seen between zero and 25,000 tonnes.

 

Buyers in soymeal include Bunge buying 200 September and Rand buying 500 December. Sellers include ABN Amro selling 400 December; Iowa Grain selling 1,000 December; Prudential selling 200 December.

 

Buyers in soyoil include ADM buying 300 December; and scattered buying. Sellers include O'Connor selling 400 December; RJ O'Brien selling 200 December and scattered selling.