September 16, 2009

 

CBOT Soy Review on Tuesday: Soar; freeze threats spark speculative buying

 

 

Soy futures on the Chicago Board of Trade soared Tuesday, rallying on speculative buying tied to Midwest frost threats.

 

CBOT November soy finished 51 cents higher or up 5.6% at US$9.60 per bushel. In pit trades, speculative fund buying was estimated at 9,000 lots in soy, 2,000 lots in soymeal and 3,000 lots in soyoil.

 

December soymeal ended US$19.50 higher at US$298.30. December soyoil finished 103 points higher at 34.82 cents per pound.

 

The danger of a frost creeping into Midwest crop areas and cutting yield potential triggered a short covering rally, with technical buying emerging as prices pushed through overhead chart resistance, said John Kleist, broker/analyst with Allendale Inc.

 

The threat of yield losses for immature crops facing a cold snap in the upper Midwest enticed traders into adding weather premium back in the market.

 

Soy spiked on midday weather models, as late maturing Midwest crops need frost free weather into October to achieve their potential, agronomist said.

 

The weather allowed futures to correct oversold conditions, with the US$9.00 level basis the November future serving as a sturdy barrier to downside movement, Kleist said.

 

Technical buying was key to the acceleration of price gains, with pre-placed buy orders activated once futures eclipsed resistance at the November contract's 10-day and 200-day moving averages.

 

A strong high pressure system is seen pushing colder temperatures into the upper Midwest beginning Thursday and Friday of next week. This is slightly colder than previous model runs, with a damaging frost or potential freeze seen across much of the Corn Belt later next week.

 

"The frost threat is definitely there, with midday models increasing the threat of freezing temperatures in north and northwest Midwest late in 6- to 10-day forecasts," said Donald Keeney, meteorologist with Cropcast Weather Services.

 

The weather remains a featured attraction, particularly with soy yields vulnerable to freeze damage amid the crops immature level of development.

 

U.S. Department of Agriculture said Monday only 17% of the crop was dropping leaves as of Sunday, up from 7% the prior week, but down from 20% last year and the five-year average of 36%. Only 3% of the crop in Illinois was dropping leaves, compared to the average of 33%, and Indiana was at 15% compared to the average of 45%. Iowa was also well behind schedule, with 18% dropping leaves compared to the five-year average of 36%.

 

 

Soy Products

 

Soy product futures spiked in unison with soy, as the threat of a yield robbing Midwest freeze raised concerns about quality soy availability for crushing amid tight old crop carryover supplies, analysts said. Both soymeal and soyoil rallied, but meal gained product share on adjustments in spreads amid meal's larger makeup of the crush.

 

December oil share was 36.93%, while the November/December soy crush ended at 79 1/4 cents.