September 27, 2006
CBOT Soy Review on Tuesday: Soars on borrowed strength from wheat
Chicago Board of Trade soybean futures ended sharply higher Tuesday, rallying to seven-week highs, with spillover momentum from wheat, technical buying and tightening supply forecasts underpinning the market, analysts said.
September soybeans settled 24 1/2 cents higher at US$8.92 1/2, and November soybeans finished 25 cents higher at US$9.07 1/2. September soymeal settled US$8.10 higher at US$247.90 per short tonne, and December soymeal settled US$8.90 higher at US$254.60. September soyoil ended 65 points higher at 37.19 cents a pound, and December soyoil finished 76 points higher at 37.87.
The price strength was largely related to wheat's surge, with concerns for world oilseeds losing acres to grains an underpinning theme, said Anne Frick, senior oilseeds analyst with Prudential Financial in New York.
Soybeans benefited from spillover buying, as participants looked for markets to buy with wheat locked at its daily upper trading limits, analysts said.
The ability of the most-active November contract to propel above psychological resistance at the US$9.00 level for the first time in seven weeks uncovered fresh technical buying interest, analysts added. The potential for declining crop production and yield forecasts in next week's U.S. Department of Agriculture crop report amid August heat in the southern soybean belt provided underlying fundamental support as well, traders said.
The market will have to factor in increased competition for world oilseed acres as wheat looks to take some rapeseed and sunseed acres in Europe next year, Frick added.
Meanwhile, the DTN Meteorlogix forecast said a warm and dry weather pattern covers the central U.S. throughout this week. The far-southeast Plains into the Delta will receive light rainfall from moisture streaming north due to Hurricane Henriette-related circulation off the Baja California coast. This moisture will give a boost to crops following extensive hot and dry weather in August. However, substantial improvement in yield prospects is not expected due to extensive drying out of soybeans in the region as a result of the late-summer heat wave. The hardest-hit crop looks to be double-crop soybeans, Meteorlogix reports.
USDA is scheduled to release its weekly crop progress report at 4 p.m. EDT. Analysts anticipate crop ratings to come in steady to 2 percentage points lower.
In pit trades, Fimat, Fortis and Bunge Chicago each bought 500 November, ADM Investor Services and JP Morgan each bought 300 November, and Rand Financial bought 400 November. Speculative fund buying was estimated at 5,000 lots.
On the sell side, FCStonnee and MF Global each sold 600 November, and JP Morgan sold 400 November.
SOY PRODUCTS
Soy product futures catapulted higher in unison with soybeans Tuesday. The products followed the lead of soybeans, with soymeal rising to seven-week highs. Borrowed strength from the bullish tonnee circulating through the CBOT ag complex, technical momentum and supportive world feed demand served as underpinning features, analysts said.
Soyoil futures climbed to four-week highs, feeding off the speculative push in the complex, with spillover from higher crude oil futures adding to the higher tonnee, analysts say. Supportive biodiesel demand with increasing capacity in the industry applied mild strength as well, with traders factoring in the potential for tighter soyoil stocks amid thoughts the USDA is underestimated soyoil usage for biodiesel, said Bill Nelson, associate vice president at A.G. Edwards and Sons in St. Louis, Missouri.
December oil share ended at 42.65% and the September crush ended at 62 cents.
In soymeal trades, Iowa Grain bought 600 December, and ADM Investor Services bought 400 December. JP Morgan sold 800 December. Speculative funds were estimated buyers of 2,000 lots.
In soyoil trades, speculative fund buying was estimated at 2,000 lots, with buyers and sellers scattered among various commission houses.
