October 30, 2008
CBOT Soy Review on Wednesday: Complex closes on strong gains, off limit-up
Chicago Board of Trade soybean futures maintained strong gains on Wednesday's close, but move off their limit-up highs.
"The whole soy complex has gotten too cheap," Anne Frick, an analyst with Prudential Bache. "Ultimately, we could go lower, but right now we need a rally to induce fresh selling."
The November soybean contract closed with gains of 58 1/2 cents a bushel at US$9.37 1/4, after hitting the exchange-imposed 70-cent-maximum trading limit. January soybeans added to 59 cents US$9.47, also a limit-up trade.
Funds bought an estimated 5,000 contracts. Traders termed synthetic trading in the options pit "minimal."
December soymeal settled US$16.20 higher at US$283 per short tonne. December soyoil finished 245 points higher at 34.33 cents per pound, after trading at the 250-point limit for most of the day.
Funds bought an estimated at 1,000 lots in both soymeal, and soyoil.
Traders offered a somewhat mixed reaction to the day's rally, which was also seen in the grain pits. One said the market was in "short-covering mode." Another suggested it may have turned a corner after slipping about 20% since the beginning of October.
"If you get some stability in the stock market and highs for the dollar, you can pump some money back into commodities," a CBOT floor trader said. "People are used to selling into rallies; now we're moving into buying on the breaks."
"There's room to back and fill" as the dollar has a long way to fall before giving up its gains during the last couple weeks of financial turmoil, he said.
The markets are currently digesting the Federal Reserve Bank cut the federal funds rate by half a percentage point to 1%. U.S. equities indexes originally flip-flopped on the news, but are now trading higher. The Dow Jones Industrial Average is up over 100 points.
Soy-product futures jumped Wednesday. Soyoil was the first component of the complex to hit limit-up territory and it stayed there the longest. The trade followed the strength in crude oil, which is trading up about US$5, a CBOT floor trader said. "[Soy]oil took the most out on the way down and it's got the potential to put the most back in," the trader said.
December oil share ended at 37.75% and the November/December crush ended at 63 cents.
The U.S. Census Bureau will release its September Fats and Oils Production, Consumption and Stocks report Thursday around 8 a.m. EDT. The report includes information on the soybean crush.