October 7, 2009

 

CBOT Soy Review on Tuesday: Rally on dollar weakness, weather concerns

 

 

Soy futures on the Chicago Board of Trade rallied Tuesday, with speculative buying and short covering inspired by bullish outside market influences and weather concerns.

 

CBOT November soy finished 25 cents higher at US$9.10 per bushel.

 

December soymeal ended US$7.00 higher at US$277.50 per short tonne. December soyoil finished 41 points higher at 34.26 cents per pound. In pit trades, speculative fund buying was estimated at 7,000 lots in soy, 1,000 lots in soymeal and 2,000 lots in soyoil.

 

Speculative funds were energized buyers Tuesday, with the drubbing of the U.S. dollar serving as a catalyst for broad based commodity strength, said John Kleist, broker/analyst with Allendale Inc.

 

Wet, cold weather was the other bullish feature in the market. Harvest delays from central U.S. rains and the threat of yield losses in late maturing crops, as freezing temperatures move into the Midwest this week, provided some "fundamental legitimacy" to the session's rally, said Kleist.

 

Technically inspired buying added to the bullish theme, with advances accelerating once the November contract eclipsed chart resistance at the psychological US$9.00 per bushel level.

 

Meanwhile, strong demand and tight nearby stocks served as bullish reminders that the market needed some risk premium, but record 2009 production forecasts remained an anchor to limit upward potential, traders said.

 

A major slowing of soy drying and harvesting due to unseasonably heavy rainfall with localized amounts totaling 2.00 inches to 3.00 inches in total is sensible in parts of Missouri, Illinois, and Indiana this week, T-storm Weather said in a forecast. Three inches is average for all of October in Illinois, T-Storm Weather said.

 

Otherwise, frost and freezes remain likely this weekend and early next week. Soy will continue to mature prior to frost due to the continual loss of daylight, T-storm Weather said.

 

 

Soy Products

 

Soy product futures spiked in step with soy. Soymeal was bolstered by the gains in soy, with broad based commodity strength and concerns about harvest delays slowing the availability of new supplies to crushers underpinning prices, analysts said.

 

Soyoil futures ended higher with the rest of the complex, but continued to lose product value to soymeal on adjustments in the meal/oil spread relationship. Spillover support from crude oil buoyed prices, but ample domestic stocks allowed futures to remain as the weaker leg on product spreads.

 

December oil share was 38.18%, while the November/December soy crush ended at 77 1/4 cents.