October 19, 2006

 

CBOT Soy Review on Wednesday: Extends rally on tech buys

 

 

Chicago Board of Trade soybean futures ended higher Wednesday, as technically inspired buying propelled prices to higher levels.

 

November soybeans finished 4 cents higher at US$6.04 1/2. December soymeal settled US$0.90 lower at US$179.60 per short tonne, while December soyoil ended 26 points higher at 25.94 cents a pound.

 

Soybeans were able to extend their current uptrend on technical momentum, aided by underlying export demand and market perceptions that futures remain underpriced in relation to corn and wheat, said John Kleist, analyst with Top Third Ag Marketing in Chicago.

 

Technical traders pushed the market above key resistance at the November contract's 200-day moving average, and with futures settling above the US$6.00 level for the second consecutive day, momentum has switched from bearish to bullish, said Allendale Inc.'s Joe Victor.

 

Traders said there was some unwinding of corn/soybean and wheat/soybean spreads that aided the market's price strength.

 

Overall, it is a technically inspired, counter-seasonal rally, backgrounded by good demand, Kleist said. However, in order for the market to maintain prices above US$6.00, world importers will have to stay aggressive buyers to convince traders that the market isn't pricing itself out of consumption in the face of a large crop coming in, Kleist added.

 

Meanwhile, the DTN Meteorlogix forecast says weather conditions will lead to slow harvest progress in the U.S. Midwest during the next five days. Episodes of showers will remain in the region, moving from west to east, with only brief one-day periods of drier weather. Precipitation will total up to one-half inch in the western Midwest, and up to one inch in the eastern Midwest. Temperatures will be notably colder as well, reaching below to much-below normal values across the entire Midwest by Saturday. There will be more rain during the next 10 days, primarily in the southern and eastern areas of the region - southeastern Missouri through the Ohio Valley and the Great Lakes, Meteorlogix reports.

 

In pit trades, Calyon Financial and RJ O'Brien each bought 1,500 November, Shatkin/Arbor bought 1,000 November, Iowa Grain and Fortis each bought 500 January, with various firms active buyers as well. Speculative funds were estimated buyers of 4,000 contracts. Sellers were scattered across various houses with Term Commodities a featured seller of 700 November.

 

Day session volume for soybeans on the e-CBOT platform totaled 32,984 contracts.

 

South American soybean futures ended higher, with the November futures settling 5 cents higher at US$6.75.

 

 

SOY PRODUCTS

 

Soy product futures ended mixed, with soyoil gaining product share on technically inspired speculative buying. Active soyoil contracts rallied to eight-week highs, with the market buoyed by the December futures' ability to pierce through resistance at the contract's 100- and 200-day moving averages, analysts said. Underlying support was generated from optimistic long-range demand prospects, traders added.

 

Soymeal futures ended at modestly lower levels, pressured by light corrective selling and product spreading, traders said. Disappointment from news of the Philippines buying soymeal from India and Argentina as opposed to U.S. supplies, was slightly bearish to the market as well, added Allendale's Victor.

 

January oil share ended at 42.14%, and the November/December crush ended at 76 cents.

 

In soymeal trades, Fimat bought 600 December, and Citigroup bought 300 December. JP Morgan sold 1,300 December, and Fimat sold 500 December. JP Morgan was reported to execute 2,000 December crush spreads.

 

In soyoil trades, Man Financial bought 800 December, JP Morgan bought 1,000 December and 500 March, and Calyon Financial and RJ O'Brien each bought 500 December. Speculative fund buying was estimated between 3,000 and 4,000 contracts. Sellers were widely scattered between various commission houses.