September 29, 2006

 

CBOT Soy Review on Thursday: Ends firm; wheat support, short covering

 

 

Chicago Board of Trade soybean futures ended Thursday's session posting strong gains, rallying on technical short covering amid borrowed strength from surging wheat futures.

 

November soybeans finished 10 1/4 cents lower at US$5.52 3/4. December soymeal settled US$1.70 higher at US$163.20 per short tonne, while December soyoil ended 31 points higher at 24.37 cents a pound.

 

The strength of wheat buoyed upside momentum throughout the CBOT ag complex, with weak market shorts running for cover, after technical buying propelled prices above overhead resistance levels, analysts said.

 

Spillover strength from soyoil amid rising crude oil futures added strength as well, with underlying demand feeding enthusiasm to buyers also, traders said.

 

Nevertheless, technical short covering was a key catalyst for the gains, with weaker shorts squaring a few positions ahead of Friday's USDA report, pushing prices to new highs for the week.

 

However, despite the market's gains, prices remain range bound, as ample old crop supplies and large new crop inventories poised to enter the pipeline over the next few weeks limit upside potential, analysts said.

 

On tap for Friday, the U.S. Department of Agriculture is scheduled to release its quarterly grain stocks report Friday 7:30 a.m. CDT (1230 GMT). The average of analysts' guesses surveyed by Dow Jones estimate 4th quarter soybean usage around 508 million bushels, bringing stocks down to 482 million bushels. Estimates ranged from 460 million to 492 million.

 

Meanwhile, the DTN Meteorlogix forecast calls for mostly dry weather to cover the region through the start of next week, except for some light rain or drizzle in Minnesota and Wisconsin. Harvest conditions will improve, but some slowdowns will still be possible in the Ohio Valley and eastern Midwest due to recent rains and a slower warming trend in Indiana, Ohio and Kentucky.

 

In pit trades, speculative fund buying is estimated at 6,000 contracts with Fimat a buyer of 2,000 November, and Calyon Financial, Man Financial and Shatkin/Arbor each active buyers as well. Sellers were scattered across various commission houses, with ABN Amro and Iowa Grain featured sellers.

 

Day session volume for soybeans on the e-CBOT platform totaled 30,140 contracts.

 

South American soybean futures ended higher, with the November future settling 1-cent higher at US$6.23.

 

 

SOY PRODUCTS

 

Soy product futures settled higher with soybeans. Soyoil was the leader of the products to the upside, with strength in crude oil futures generating speculative buying support for futures, analysts said. Active contracts rallied to new highs for the week, with a lower than expected stocks figure in the Census crush report providing underlying support, traders added.

 

Soymeal futures followed the lead of soybeans, sustaining a firm tonnee despite losing product share to soyoil. Solid domestic and export demand remains an underpinning feature, with strong weekly export sales and a lower than expected Census stocks figure aiding the price strength, analysts said.

 

December oil share ended at 42.75%, and the November/October crush ended at 67 cents.

 

In soymeal trades, buyers and sellers were widely scattered among various commission houses, with speculative funds estimated net buyers on the day.

 

In soyoil trades, Fimat bought 2,000 December, Tenco bought 1,000 December, UBS Securities bought 700 December, with Calyon Financial and JP Morgan each buying 500 December. Fortis sold 2,000 December, with ADM Investor Services and Citigroup each featured sellers. Speculative fund buying was estimated between 3,000 and 4,000 contracts.