October 27, 2006

  

CBOT Soy Review on Friday: Technical momentum, fund buying boost market

 

 

Soybean futures on the Chicago Board of Trade rose Friday, supported by a strengthening technical picture and a weak U.S. dollar that encouraged speculative and fund buying, traders and analysts said.

 

Funds bought a net 3,000 soybean contracts as of 1:30 p.m. EDT.

 

November beans rose 7 3/4 cents to US$6.35 1/2, and January added 7 1/4 cents to US$6.49. December soymeal settled US$1.60 higher at US$187.70 and December oil was up 46 points to 27.50 cents a pound.

 

"Funds bought oil, beans and the corn today, which helped support the market," said Vic Lespinasse, analyst and floor broker with A.G. Edwards.

 

A rally in the soyoil pit also supported the soy complex. December oil traded to its highest level in three months, hitting a 27.58-cent high, also on strong fund buying.

 

The fact that crude oil futures at the New York Mercantile Exchange didn't break but instead consolidated and ended up closing 39 cents higher at US$60.75 a barrel was supportive for soyoil, Lespinasse said. Higher oil prices create renewed interest in alternative fuels such as biodiesel.

 

Technical strength, aided by a lower dollar versus the world's major currencies, also supported the market. While technicals are improving, November soybeans still need to trade and close above the recent US$6.40 high to give bulls fresh momentum, said John Kleist, analyst at Top Third Marketing in Chicago. The contract topped out at US$6.39 1/2 Friday.

 

News of Asian soybean rust findings in 10 additional counties in Alabama, North Carolina and Kentucky, bringing the U.S. total to 210 counties, may have been a supportive background feature for the market, a broker said.

 

The airborne fungus has been found as far south as Florida, as far west as eastern Texas, as far north as west-central Indiana, and as far east as coastal areas of North Carolina in 2006.

 

Lespinasse disagreed, saying it was not a factor in the market, though it is "potentially very bullish for next year," he said.

 

Man Financial and Calyon Financial each bought 1,000 January contracts, R.J. O'Brien bought a net 300 January and 600 November, while ABN Amro, Goldenberg Hehmeyer and Tenco each purchased 200 January.

 

On the sell side, J.P. Morgan sold 600 January, 600 July and 600 November 2007 contracts, ADM sold 200 January and 200 November, FCStone sold 200 January and Fimat sold 200 May and 100 July.

 

Spread trading was noted, as Tenco spread 1,000 January/November contracts at 13 3/4 cents and J.P. Morgan spread 700 November/January at 14 cents.

 

 

SOY PRODUCTS

  

Soy product markets closed higher, led by the rally in soyoil and the strength of beans.

 

December soymeal settled US$1.60 higher at US$187.70 and December oil was up 46 points to 27.50 cents a pound.

 

Sharply higher crude palm oil futures on the Bursa Malaysia Derivatives exchange closed got the market started on a bullish note.

 

News that India may increase edible oil imports in 2006-07 to 5.2 million metric tonnes, from 4.4 million estimated in 2005-06, because of an oilseed shortage was likely supportive for the market, a broker said.

 

In oil, Rand Financial bought 700 December, Man Financial bought a net 400 December, Fimat bought 200 March and 300 December, while Bunge and Citigroup each bought a net 200 December. ADM sold a net 300 December, while Tenco sold 200 March and 100 December.

 

Funds bought a net 2,500 oil contracts as of 1:30 p.m. EDT.

 

In meal, J.P. Morgan sold a net 100 December and 200 January and Tenco sold 100 each January and May and 200 March. Buyers were light and scattered.