October 10, 2009

 

CBOT Soy Review on Friday: Extends recovery on crop outlooks, weather

 

 

Chicago Board of Trade soy futures continued their ascent from prior lows Friday, with buyers energized by lower-than-expected crop outlooks and weather concerns.

 

CBOT November soy finished 28 cents higher at US$9.64 a bushel.

 

December soymeal ended US$7.60 higher at US$297.30 a short tonne. December soyoil finished 63 points higher at 35.18 cents a pound. In pit trades, speculative funds were estimated buyers of 8,000 lots in soy, 1,000 lots in soymeal, and 2,000 lots in soyoil.

 

The market soared to three-week highs, as short position holders continued to exit positions amid traders' thoughts that seasonal lows had been established in the market, analysts said.

 

Friday's crop report was less bearish than the trade had expected and when you add in adverse October weather, sellers ran for cover, analysts added.

 

Frost and freeze threats may carry less impact on the market at this point, but continued delays to harvesting will keep nearby supplies tight, a supportive sign for prices, a CBOT floor trader said. Technical buying was featured as well, with bullish traders encouraged by the November contract's ability to eclipse overhead chart resistance.

 

"Heading into Friday's crop report, I think the trade was trading nearly a 300-million-bushel carryover, and now they have nothing to stand on, opening the door for futures to trade in the US$9.60 area in November futures," said Mike Zuzolo of Global Commodity Analytics and Consulting.

 

The market added risk premium back into prices, taking into account that strong demand will continue to put a strain on a record new crop harvest, particularly if South America encounters any planting or production problems.

 

Meanwhile, late-season weather problems are taking a toll on selected soy crops, with disease and frost damage taking some yield off crops in Mississippi and Ohio.

 

The U.S. Department of Agriculture projected a record soy crop in its October production forecast Friday, but the rise in output was tempered by reductions in forecasts for some states due to late season weather issues.

 

The DTN Meteorlogix weather forecast for the Midwest features dropping temperatures leading to very cold temperatures by Sunday morning, 15 to 25 degrees below normal. A hard freeze is expected west of the Mississippi River in most areas and will damage immature soy crops. Frost and a possible freeze may extend east of the river into Illinois, Wisconsin and Michigan, but not be as extensive. Heavy rains and flooding in the southern and eastern crop areas will lead to significant delays, Meteorlogix said.

 

In the Delta, field work will continue to be delayed by showers. The Ohio River Valley could receive as heavy as three-tenths to 1.5 inches of rain. By Saturday, the showers will be mainly in the southern Delta and southeast areas, but will be much lighter, Meteorlogix said.

 

 

Soy Products

 

Soy product futures rose in step with the upward move in soy. Soymeal managed to recoup product share once again, with tight nearby supplies supporting corrective movements in the meal/oil spread relationship, analysts said. Soyoil was higher in unison with the rest of the complex, feeding off advances in soy and crude oil futures.

 

December oil share was 37.17%, while the November/December soy crush ended at 77 1/4 cents.