October 9, 2009

 

CBOT Soy Review on Thursday: Rally on commodity strength, weather issues

 

 

Chicago Board of Trade soy futures climbed Thursday, rallying to 3-week highs on broadbased commodity price strength and weather concerns.

 

CBOT November soy finished 24 cents higher at US$9.36 per bushel.

 

December soymeal ended US$8.70 higher at US$289.70 per short tonne. December soyoil finished 53 points higher at 34.57 cents per pound. In pit trades, speculative funds were estimated buyers of 6,000 lots in soy, and 1,000 lots each in soyoil and soymeal.

 

Weakness in the U.S. dollar served as the headlining catalyst to spark upside movement in the market, analysts said. Price gains were seen across the commodity complex, with some traders viewing the speculative buys as hedges against inflation.

 

Wet, cold weather conditions forecast for the U.S. Midwest was another bullish feature underpinning prices, as further harvest delays and quality issues are expected to keep nearby new-crop supply availability tight, analysts said.

 

Louisiana Gulf exporters said barge basis bids for immediate shipments of soy from inland locations jumped 1-7 cents a bushel Thursday, pushing premiums as much as 17 cents higher for the week. A U.S. Department of Agriculture grain transportation report issued Thursday morning said a lack of new-crop grain may be hindering U.S. grain exports.

 

The upward tonnee was also energized by traders covering short positions ahead of Friday's crop reports. A short position in the market is a bet that prices will trend lower.

 

Traders that recently put on new shorts in the market covered positions, taking precaution in case Friday's crop report produces surprisingly lower-than-expected yield and production forecasts, a CBOT floor analyst said.

 

The consensus of analysts looks for an increase in yields due to crop ratings holding above average through September, and the vast majority of reports from farmers has yields coming in better than expected.

 

USDA is scheduled to release its crop production and supply and demand reports at 8:30 a.m. EDT. The average of analysts' estimates projects a crop size of 3.291 billion bushels with a yield of 42.9 bushels per acre. The averages ranged from 3.217 billion to 3.383 billion bushels for production and 41.9 to 44.0 for yields. In September, USDA projected a crop size of 3.245 billion bushels using a yield of 42.3 bushels an acre.

 

The T-storm Weather forecast said heavy rain will continue to plague the southeastern third of Midwest soy through Friday. Unseasonably cold weather follows these rains, which is likely to end the growing season by Sunday morning across the northwestern half of the corn belt due to minimum temperatures in the 20s Fahrenheit.

 

Light rain and snow follow on Sunday in the corn belt, but totals mostly stay less than 0.25 inch. Cold weather sags further east early next week, leading to widespread frost in the eastern corn belt with damaging frosts and freezes in the northern half. The end result is that only the Delta and southern Illinois, southern Indiana, and southern Ohio may escape without a damaging event, T-storm Weather forecasts.

 

 

Soy Products

 

Soy product futures ended higher, feeding off the bullish theme in spillover from soy.

 

Broadbased commodity strength led the markets higher, with soymeal garnering support from tight nearby supplies, while soyoil attracted buyers on price strength in crude oil futures, analysts said. Nevertheless, soymeal continued to regain product share value on corrections in the meal/oil spread relationship, a cash-connected CBOT floor broker said.

 

December oil share was 37.38%, while the November/December soy crush ended at 81 1/2 cents.