October 18, 2006

 

CBOT Soy Review on Tuesday: Up on speculative buys; demand, technical strength

 

 

Chicago Board of Trade soybean futures ended Tuesday's session posting double-digit gains, bolstered by speculative buying attributed to underlying demand strength and technical momentum.

 

November soybeans finished 11 1/2 cents higher at US$6.00 1/2. December soymeal settled US$2.00 higher at US$180.50 per short tonne, while December soyoil ended 75 points higher at 25.68 cents a pound.

 

Record projected demand for soybean usage and ideas the market is undervalued in comparison to corn and wheat is attracting speculative buyers, as traders attempt to keep futures in tandem with the strong gains in neighboring grain futures, said Brian Hoops, president Midwest Market Solutions in Yanktonne, S.D.

 

Technically inspired buying was a driving force in the market, with pre-placed buy orders activated once nearby contracts eclipsed overhead resistance levels, traders added.

 

The November contract's climb and settlement above the psychological US$6.00-per-bushel level is seen as technically supportive, with analysts pointing to harvest slow downs due to wetter Midwest conditions this week aiding the gains as well.

 

Strong domestic and export demand are keeping a floor under prices, with the potential for acreage losses to corn and wheat in 2007 and projected lower South American acres helping provide optimistic bullish long range outlooks, added Hoops.

 

Meanwhile, the DTN Meteorlogix forecast calls for additional rainfall of up to one-half inch in the western Midwest during the balance of this week, and as much as an additional inch of rain over the eastern Midwest - notably in the corridor from Interstate 70 south to the Ohio River. Temperatures will get colder, but values will not be cold enough to cause harm. This outlook, however, is unfavorable for harvest across most of the region, Meteorlogix reported.

 

In pit trades, Speculative funds were net buyers on the day, with buying and selling widely scattered among various commission houses.

 

Day session volume for soybeans on the e-CBOT platform totaled 41,945 contracts.

 

South American soybean futures ended higher, with the November futures settling 10 cents higher at US$6.70.

 

 

SOY PRODUCTS

 

Soy product futures ended higher across the board, with soaring soyoil prices leading the upward assault. Soyoil futures rallied to over six-week highs, bounding higher on speculative buying, as underlying demand and technical momentum attracted speculative buyers. The ability of most-active December contract to bolt through resistance at its 200-day moving average and one-month highs opened the door for the price surge, as futures broke away from the influence of crude oil price pressures, analysts said.

 

Soymeal futures ended higher, but emerged as the weak sister of the soy complex, as soyoil/soymeal spreading limited the market's upside potential, traders said. Nevertheless, the market rallied to new three-month highs, remaining firmly planted above technical support levels, traders added.

 

January oil share ended at 41.79% and the November/December crush ended at 79 cents.

 

In soymeal trades, ADM Investor Services and JP Morgan each bought 600 December, Fimat bought 300 December and Bunge Chicago bought 200 December. Tenco sold 500 July, with Man Financial, JP Morgan and Rand Financial each selling 300 December. Speculative fund buying was estimated between 1,000 and 2,000 lots.

 

In soyoil trades, Rand Financial and Fortis each bought 1,000 December, and ADM Investor Services, Calyon Financial, Iowa Grain and Man Financial each bought 300 December. Sellers were widely scattered among various commission houses. Speculative fund buying was estimated near 4,000 lots.