January 5, 2006

 

CBOT Soy Review on Wednesday: Spec buying leads soybeans, soyoil higher

 

 

Soybean futures on the Chicago Board of Trade ended on firm footing Wednesday, finishing at session highs, managing to sustain a supportive tonnee on speculative buying and the absence of any aggressive selling pressures.

 

March soybeans finished 3 3/4 cents higher at US$6.32 1/4; March soymeal settled US$0.80 lower at US$196.90 a short tonne; and March soyoil ended 36 points higher at 23.60 cents a pound.

 

The market failed to re-capture the speculative buying that engulfed futures Tuesday, but without any significant sellers stepping up to the plate, technical strength propelled prices higher again, said John Kleist of Kleist Agricultural Consulting in Arlingtonne Heights, Ill.

 

Lingering worries over heat and dryness in Argentina as well as the potential for a drying pattern to emerge in Brazil added to the market's strength. Light hedge-related selling weighed on prices initially, attracting scattered profit-taking in early action.

 

However, without any sustained selling pressures and a general unwillingness of participants to press the short side of the market with index fund-related buying anticipated, market fundamentalists have turned their attention to pure technicals, unwilling to step in front of bullish train storming down the tracks, Kleist added.

 

Price strength was consistent down the stretch, with the most-active March futures rallying to a 4-month high as speculative buying continues to emerge on price breaks.

 

Meanwhile, the DTN Meteorlogix forecast said Argentina's soybean belt remains on track for very hot and dry weather during the next five days. Very little rainfall is expected before the middle of next week. High temperatures are also still on course to reach well into the 90s Fahrenheit, and possibly reaching 100 degrees by Thursday. This coming weekend again showcases the prospect for temperatures to range from 93 to 102 Fahrenheit, Meteorlogix adds.

 

In Brazil, overall crop weather has been very good. Plus, there has been enough dry weather to allow producers to apply fungicides and keep soybean rust at bay, Meteorlogix said. Going into the end of the week, Brazil crop weather conditions will decline significantly, as highs could reach 95-98 degrees Fahrenheit in Rio Grande do Sul due to the development of an upper-atmosphere ridge of high pressure in southern Brazil. Should this feature actually develop, it would be the third straight year for drought in southern Brazil, Meteorlogix added.

 

In pit trades, Calyon Financial, Citigroup, Goldenberg Hehmeyer, Rand Financial, Refco/Man and DT Trading were featured buyers. ADM Investor Services, Man Financial, Rand Financial and Tenco were key sellers. Commodity fund buying was estimated at 3,000 contracts.

 

South American soybean futures finished higher across the board. The March futures ended 9 cents higher at US$6.55.

 

 

SOY PRODUCTS

 

Soyoil futures rallied to a new high for the current move, ending on their highs, as the market continues to shake loose short positions, traders said. Speculative buying was a featured attraction, allowing futures to reverse early losses, with sellers remaining on the run. Heavy deliveries against the nearby contract applied modest pressure, but with technicals supportive and index fund buying anticipated, market shorts are eager to cover shorts and establish new longs, analysts said.

 

Soymeal futures stumbled lower, pressured by soyoil/soymeal spreading. The correction in the soy product spread relationship continues to keep overhead pressure on prices, with the most active March futures encountering strong resistance near the US$200.00 level. March oil share climbed to 37.47%, and the March crush was at 60 1/2 cents.

 

In soymeal trades, buyers and sellers were scattered among various firms. Commodity funds were net sellers on the day.

 

In soyoil trades, commodity fund buying was estimated at 4,000 contracts, with ADM Investor Services, Calyon Financial, Citigroup, Fimat, Iowa Grain, Man Financial and Shatkin/Arbor featured buyers. ADM Investor Services, Citigroup, Man Financial, Rand Financial and Tenco were key sellers.