December 12, 2007

 

CBOT Soy Review on Tuesday: Rallies, new contract highs set again

 

 

Chicago Board of Trade soybean futures ended higher Tuesday, climbing to new contract highs once again on underlying demand, supply and demand data and technically motivated buying.

 

January soybeans settled 9 3/4 cents higher at US$11.35 1/2 and March soybeans ended 10 1/4 cents higher at US$11.54 1/2. January soymeal settled US$4.30 higher at US$318.20 per short tonne. January soyoil finished 16 points higher at 45.92 cents per pound.

 

Demand continues to support prices and, consistent with demand led markets, futures continued to probe new highs, said Dan Basse, president of Ag Resource Company in Chicago.

 

A tightening U.S. soybean balance sheet, strong cash markets and lingering worries over dryness in parts of South American soybean areas served as the perfect storm to push prices to new 34 year highs, said Dax Wedemeyer, analyst with U.S. Commodities in West Des Moines, Iowa.

 

Meanwhile, talk of the potential for the inclusion of a biofuel mandate in the farm bill provided additional optimism to keep bullish momentum flowing, traders said.

 

The crop report did not provide any new significant developments, but there was nothing for market bears to sink their teeth into, Basse said. With nothing there to shake the tree from the bulls, the market continues to feed off its own momentum, satisfying objectives of setting new highs daily, analysts added.

 

U.S. Department of Agriculture trimmed soybean ending stocks 25 million bushels to 185 million, a 68% decline from 2006-07. The figure was below the average of survey guesses, but within the range of estimates.

 

U.S. soybean exports were raised 20 million bushels based on stronger-than-expected sales to China, the USDA reported. The soybean crush is raised 5 million bushels due to improved soybean meal export prospects, the USDA said in the report.

 

Senate Agriculture Chairman Tom Harkin, D-Iowa, said Tuesday that he is in favor of allowing the Senate to vote on an amendment to include a mandate for the production of 36 billion gallons of biofuel in the U.S. by 2022. The mandate, or renewable fuel standard - RFS - was originally slated to be a part of a new national energy bill, but Harkin said Tuesday that it looks like Congress will not be able to get that done this year.

 

The DTN Meteorlogix weather forecast said southern Brazil, specifically Rio Grande do Sul province, has very little rainfall in store for the region through the rest of this week. In Argentina, the next chance for thunderstorms in the very dry western belt does not show up until later next week. This segment of the central Argentine crop belt is in need of moisture to hold off on a possible yield reduction caused by dry and hot-weather stress that soybeans get close to the beginning of flowering, Meteorlogix said.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated between 3,000 and 4,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended higher, with soymeal rising to new contract highs. A strong underlying demand base coupled with technical strength and supportive balance sheet projections from the USDA served as the catalyst for the gains, analysts said.

 

Soyoil futures ended higher, feeding off the supportive tonnee in the rest of the complex, with higher crude oil futures lending strength as well, analysts said. However, despite its gains, the market continued to lose product share to meal on spreads, analysts added.

 

January oil share ended at 41.91% and the January crush ended at 69 3/4 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses; speculative fund buying was estimated at 2,000 lots.

 

In soyoil trades, buyers and sellers were scattered among various commission houses; speculative fund buying was estimated at 1,000 lots.