December 13, 2005

 

CBOT Soy Review on Monday: Rallies on speculative buying

 

 

Soybean futures on the Chicago Board of Trade rallied Monday, briefly soaring to one-month highs on technically related buying and speculative interest associated with broad-based commodity price strength.

 

January soybeans finished 15 1/4 cents higher at US$5.84; January soymeal settled US$7.10 higher at US$188.00 a short tonne; and January soyoil ended 15 points higher at 21.02 cents a pound.

 

The market was more concerned with outside influences, with the fundamental picture of the market unchanged, as speculative money came in to chase commodities perceived as cheap in relation to gold and crude oil, said Jim Smitherman, president Harvest Trading Group LLC in Austin, Texas.

 

The initial rally briefly pushed the spot-month January contract above the psychological US$6.00-per-bushel level, with pre-placed buy stops accelerating the gains. Speculative shorts were forced to cover positions rapidly, with many participants caught leaning the wrong way based on the fundamental make-up of the market, traders said.

 

Analysts said the climb in prices was not a total surprise, but to do it in the first half hour of trading instead over a couple of days was an eye-opening experience. One function of the soybean rally was the stimulation of farmer selling, as producers had been tight-fisted with supplies at previous levels, said Dan Basse of AgResource in Chicago.

 

The penetration of US$6.00 in Jan beans attracted farmer selling, with a lack of fundamental strength to support the higher price level and the exhaustion of investor buying at the highs uncovering profit-taking pressure to cut over half the session's gains by session's end.

 

Meanwhile, underlying support was generated from concerns over dryness in Argentine growing areas and ideas waning bird flu worries in China may spark increased feed demand from China.

 

The U.S. Department of Agriculture said soybeans inspected for export in the week ended Dec. 8 totaled 16.601 million bushels. Analysts expected soybean inspections in a range of 22 million to 27 million bushels. Accumulated soybean export inspections for the 2005-06 marketing year total 335.126 million bushels, down from last year's 425.538 million at the same time.

 

In pit trades, FCStonnee and Citigroup each bought 1,000 January; ABN Amro bought 2,000 January; Fimat bought 1,200 January and 800 March; Refco bought 500 January and 1,500 March; and Merrill Lynch and RJ O'Brien each bought 500 January. ADM Investor Services, Bunge Chicago, Cargill and FCStonnee were featured sellers. Commodity fund buying was pegged at 11,000 contracts.

 

South American soybean futures ended higher across the board. The March futures finished 18 cents higher at US$6.30.

 

 

SOY PRODUCTS

 

Soymeal futures climbed Monday, retaining their position as the strongest link in the complex, with technically inspired speculative buying and underlying demand supporting prices. The active January contract briefly rallied to its highest level since late August before speculative buying waned at the contract's 200-day moving average, opening the door for selling pressure to trim gains in unison with soybeans, traders said.

 

Soyoil futures rallied in step with the rest of the soy complex, but continued to lose product share to soymeal. Technical buying buoyed futures in early trade, with the influx of fresh speculative buying rolling into the market helping push prices near one-week highs.

 

However, the absence of fundamental support failed to maintain the early gains, and speculative selling emerged once gains in the rest of the complex were trimmed. January oil share fell to 35.86%, and the January crush was at 60 3/4 cents.

 

In soymeal trades, Bunge Chicago, Citigroup, Fimat and Refco were key buyers, with Cargill and Fimat featured sellers. Speculative funds were estimated buyers of 7,000 contracts.

 

In soyoil trades, Bunge Chicago, Calyon Financial, Man Financial, Citigroup and RJ O'Brien were key buyers. ADM Investor Services, Cargill, Citigroup, Fimat and Tenco were featured sellers. Fund buying was pegged at 4,000 lots.