December 8, 2007

 

CBOT Soy Review on Friday: Rallies to new highs; soymeal leads complex

 

 

Chicago Board of Trade soybean futures ended Friday's session posting strong gains, rallying to new contract highs on the supportive influence of soy meal, analysts said.

 

January soybeans settled 21 cents higher at US$11.19 3/4 and March soybeans ended 21 cents higher at US$11.38 3/4. January soy meal settled US$10.40 higher at US$312.70 per short tonne. January soy oil finished 6 points higher at 45.70 cents per pound.

 

The recent rally in the market has been on the back of soy meal, with a surge to new highs in meal sending bullish waves through the market, said John Kleist of Kleist Ag Consulting.

 

The prospects of a lower carryout projection in next week's supply/demand report, dryness issues for parts of South American crop areas and the notion the market needs to continue its fight for acres with corn and wheat provided additional support to fuel the gains, analysts added.

 

With spring wheat futures rallying to all-time highs, soybeans were forced to keep pace as spring wheat and soybeans each vie to recapture acreage from corn in the spring, Kleist added.

 

Meanwhile, technically inspired buying was a feature, as the trade chased after contract highs, feeding off the momentum generated from eclipsing previous highs, analysts said.

 

The DTN Meteorlogix weather forecast said in the major South America crop areas, rains will maintain favorable growing conditions from Parana, Brazil, northward during the next five days. Less rainfall is projected for Rio Grande do Sul during this period, with soil moisture supplies slowly diminishing in this area.

 

The principal crop areas of Argentina have dry conditions in general in store, Meteorlogix said. Friday's long-range charts have introduced a chance for significant shower activity to the central crop areas later next week. This is faster than what was indicated Thursday but it is still in the long range and therefore uncertain, Meteorlogix added.

 

U.S. Department of Agriculture is scheduled to be release its December supply and demand projections Tuesday at 8:30 a.m. EST. The average of analyst's estimates peg 2007-08 U.S. soybean ending stocks at 197 million bushels, down 13 million from November's forecast. The estimates ranged between 144 million and 210 million bushels.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 7,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended higher, with soy meal the clear upside leader of the soy complex. Soy meal futures soared to new contract highs and the highest level for a nearby future since July 2004 on continuation charts. Soy meal futures benefited from the combination of technical momentum and bullish underlying fundamentals, analysts said.

 

Strong cash market prices with good demand from the domestic and export markets served as the fundamental catalysts for the gains, Kleist said. In addition, traders said limit up wheat added support, as the industry remains concerned that the scarcity of good quality feed wheat will shift some demand to soy meal as an alternative, said Joe Victor, analyst with Allendale Inc. in McHenry, Ill.

 

Soy oil futures ended higher, but continued to lose ground to soy meal on spreads. The market remains in a consolidation mode, seemingly passing the bullish batonne to soy meal to lead the complex higher, Kleist added.

 

January oil share ended at 42.22% and the January crush ended at 71 cents.

 

In soy meal trades, buyers and sellers were scattered among various commission houses, with speculative funds buying estimated in a range of 4,000 to 5,000 lots.

 

In soy oil trades, ADM Investor Services and JP Morgan each bought 300 January, Tenco bought 300 March. Bunge Chicago sold 500 January, Tenco sold 400 March, and Citigroup and Iowa Grain each sold 400 January. Speculative fund buying was estimated at 2,000 lots.