November 18, 2009

 

CBOT Soy Review on Tuesday: Beans extend uptrend on demand, speculative buys

 

 

Chicago Board of Trade soy futures rallied to three-month highs Tuesday, supported by strong demand and lingering fears of field losses.

 

CBOT Jan soy ended 19 1/2 cents higher at US$10.29 1/2, and March soy settled 20 cents higher at US$10.35 3/4.

 

In pit trades, speculative funds were estimated buyers of 6,000 lots in soy, and 2,000 lots each in soymeal and soyoil.

 

The market produced some surprising gains in the face of a firmer U.S. dollar, following through on a recent uptrend amid strong demand, said Bill Nelson, analyst with Doane Advisory Service in St. Louis, Mo.

 

A solid crushing pace and exports served as the backdrop for the day's gains, raising concerns that overall demand may be better than expected, Nelson said.

 

Worries of possible field losses from the remaining unharvested crops amid some heavy rains in some parts of the Midwest provided price support as well.

 

The market continues to keep risk premium in the market, as traders remain cautious of potential challenges for South American crops despite improved weather conditions for Argentina crops recently, said Jack Scoville, analyst with Price Futures Group.

 

Technically inspired buying was featured as well, with buying accelerating in late dealings, as pre-placed buy orders were activated once futures pierced through chart resistance at Monday's highs.

 

The market initially drifted lower, pressured by profit taking from recent gains and weakness from the firmer U.S. dollar. However, the market quickly decoupled from its reverse relationship with the greenback, as sellers failed to generate follow-through momentum.

 

Analysts anticipate the market will continue to experience choppy daily activity, but find support from a post harvest rally until demand slows.

 

The DTN Meteorlogix weather forecast said rain of up to 1.5 inches in the central and eastern Midwest, notably in Illinois and Indiana, was expected Tuesday. This rain comes on top of the 1.5 inches which fell Monday. Rain from the southern part of the western Midwest through much of the eastern Midwest will further delay the summer crop harvests this week.

 

 

Soy Products

 

Soy product futures ended higher, with soymeal the upside leader. Soymeal rallied in unison with soy, buoyed by demand strength and lingering tightness of cash meal supplies in the eastern Midwest, analysts said.

 

Soyoil futures ended modestly higher, managing to claw their way back from earlier losses on support from late strength in crude oil. Speculative led buying helped futures carve out new five-month highs, with technical buying emerging from the market's ability to overcome chart resistance at Monday's high, analysts said.

 

December soymeal ended US$4.30 higher at US$308.70 per short tonne, and December soyoil finished 4 points higher at 39.81 cents per pound.

 

December oil share was 39.34 while the January/December soy crush ended at 77 cents.