December 6, 2005

 

CBOT Soy Review on Monday: Rallies on spec short covering

 

 

Soybean futures on the Chicago Board of Trade finished with strong gains Monday, extending their recent uptrend on a speculative short covering bounce, traders said.

 

January soybeans finished 10 1/2 cents higher at US$5.73 1/4, January soymeal settled US$1.70 higher at US$175.40 a short tonne, and January soyoil ended 35 points higher at 21.91 cents a pound.

 

The market's advances were technical in nature, with short-covering after speculative funds seen holding a larger short position than was expected attracted buying that uncovered pre-placed buy orders resting above the market, said Brian Hoops, president Midwest Market Solutions in Yanktonne South Dakota.

 

The Commodity Futures Trading Commission said Friday in its commitments of traders report that large speculative traders held net short futures and options positions totaling 30,661 lots in soybeans as of Nov. 29.

 

The supportive theme was consistent from the outset, with advances accelerating once the active January contract eclipsed resistance at recent highs. The market rallied to two-week highs, extending its recovery from nine-month lows set last week.

 

Firm cash basis levels, rumors of China buying U.S. supplies and a higher-than-expected weekly export inspections figure provided fundamental strength to aide the supportive tonnee. Mild concerns over a drier weather outlook in Argentina this week fed the bullish nature of the market as well.

 

Nevertheless, traders said the upward move was purely a technical play, as ample nearby supplies and a lagging export pace would make it tough to sustain any prolonged rally. However, floor sources said the floor is showing hesitancy in establishing short positions, with participants leery that the reallocation of speculative commodity index fund positions into soybeans could launch a rally in the market after the first of the year.

 

Meanwhile, U.S. Department of Agriculture said soybeans inspected for export in the week ended Dec. 1 totaled 32.306 million bushels. Analysts expected soybean inspections in a range of 17 million to 22 million bushels. Accumulated soybean export inspections for the 2005-06 marketing year total 315.740 million bushels, down from last year's 399.740 million at the same time.

 

DTN Meteorlogix said Brazil and Argentina crop areas had some rain showers over the weekend, notably in Argentina, which saw rainfall of up to one inch throughout its main crop areas, even into La Pampa and Santa Rosa in the far south. During this week, additional showers are in store for northern Brazil, while southern Brazil has a more scattered rainfall pattern. Argentina will have drier weather but has a favorable soil-moisture situation following last weekend's rainfall.

 

In pit trades, ABN Amro bought 1,300 January, Calyon Financial bought 800 January, and RJ O'Brien bought 1,000 January. Fimat, Iowa Grain, Man Financial and Refco were key sellers. Commodity fund buying was estimated at 6,000 contracts.

 

South American soybean futures ended higher across the board. The March futures settled 9 3/4 cents higher at US$6.11.

 

 

SOY PRODUCTS

 

Soymeal futures ended higher, managing to recover from early session weakness on speculative and local buying. Spillover momentum from soybeans and a technical boost from the January contract's ability to push above chart resistance at its 10-, 20-, 40- and 50-day moving averages uncorked pent-up fund buying to lift futures firmly into positive territory.

 

Soyoil futures climbed to 1 1/2-week highs, extending their recovery from multi-month lows on technically motivated buying. Strength in the energy sector and a bullish spark from soybeans served as the catalyst to help the market continue its rebound in product share.

 

January oil share finished at 38.45%, and the January crush was at 53 3/4 cents.

 

In soymeal trades, Fimat, RJ O'Brien and Man Financial were featured buyers. ABN Amro, Calyon Financial, Fimat, and O'Connor were key sellers.

 

In soyoil trades, ADM Investor Services, Term Commodities, Calyon Financial, Goldenberg Hehmeyer and RJ O'Brien were featured buyers. Iowa Grain, Fimat, Tenco and ADM Investor Services were sellers. Commodity funds and commercial firms were net buyers on the day.