September 21, 2007

 

CBOT Soy Review on Thursday: Rallies on dollar weakness, demand talk

 

 

Chicago Board of Trade soybean futures rallied to new life of contract highs Thursday, soaring on bullish demand profiles amid U.S. dollar related weakness and news of China cutting import duties, analysts said.

 

November soybeans settled 17 1/2 cents higher at US$9.88 1/2 and January soybeans settled 18 1/4 cents higher at US$10.04 1/4. October soymeal settled US$8.40 higher at US$275.30 per short tonne, and December soymeal settled US$9.00 higher at US$281.20. October soyoil ended 16 points higher at 39.44 cents a pound, and December soyoil finished 24 points higher at 39.94.

 

The rally was more U.S. dollar related, with weakness in the greenback providing broad based strength across commodity markets in general, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

The market remains enthralled in a bullish uptrend, and as long as the market keeps getting a dose of supportive news, speculative buyers remain enthused, he added.

 

Underlying support was generated from ideas of increased demand from China surrounding talk of the country cutting import duties, analysts said. Speculative buying fueled the gains, with advances accelerating once the January contract breached resistance at the US$10.00 level, traders said.

 

Fundamental strength remains the underlying driver of prices, with tightening supply outlooks, growing global demand, and the need to attract additional South American acres serving as the catalysts for bullish enthusiasm, analysts added.

 

Lingering concerns involving potential planting delays in northern Brazil amid dryness issues and reports of strength U.S. Gulf basis levels was supportive to prices as well, a CBOT floor broker said.

 

Nevertheless, futures ended well off intraday highs, peeling back on speculative profit taking, producer and South American hedging pressure near the highs, analysts said.

 

The DTN Meteorlogix Weather Service forecast said hot and dry weather continues over Mato Grosso in central Brazil. There is no sign of any significant rainfall developing in northern Mato Grosso during the next two weeks. Any early planting of soybeans in northern Mato Grosso during the latter half of September will not take place this year. Indications point to the dryness persisting at least into early October.

 

China is likely to announce a temporary reduction of soybean import duty to 1% from 3% for three months to encourage imports, traders and industry officials said Thursday. It's not yet clear whether the temporary reduction will last from October to December or from November to January, but the move to attract more imports is designed to curb high domestic soybean prices, traders said.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative funds estimated buyers of 4,000 contracts.

 

 

SOY PRODUCTS

 

Soy product futures ended higher across the board, with both meal and oil futures rallying to new contract highs. Soymeal was the upside leader of the products, emerging as the strongest link in the complex. The market was buoyed by broad-based commodity strength, with weakness in the U.S. dollar and strong global feed demand underpinning features, said Jack Scoville. Soymeal prices rallied to their highest levels in 3-years, with technically based buying featured as well, traders said.

 

Soyoil futures carved out new 23 year highs, rising in unison with soybeans, with bullish demand profiles continuing to fuel upside momentum, analysts said. However, the market continued to lose product share to soymeal on spreads, analysts added.

 

December oil share ended at 41.53% and the November/October crush ended at 51 cents.

 

In soymeal trades, MF Global bought 400 December, ADM Investor Services and Fimat each bought 300 December, and Tenco and UBS Securities each bought 300 March. JP Morgan sold 500 December. Speculative fund buying was estimated at 4,000 lots.

 

In soyoil trades, Fimat bought 900 December, JP Morgan and MF Global each bought 500 December, and Bunge Chicago bought 300 December. Bunge Chicago sold 400 December, and RJ O'Brien sold 300 October. Speculative funds bought 3,000 lots.