January 22, 2009

 

CBOT Soy Review on Wednesday: Rally; Argentine weather, technicals buoy

 

 

Soybean futures on the Chicago Board of Trade bounced back Wednesday, rallying from Tuesday's setback, as Argentine crop concerns and technical buying sparked upside movement.

 

CBOT March soybeans finished 28 1/2 cents higher at US$10.20 1/2. March soy meal settled US$11.40 higher at US$320.40 a short tonne. March soyoil finished 14 points higher at 33.95 cents a pound.

 

The market consolidated Tuesday's declines, with long range forecasts for thinner rain coverage and amounts in Argentina raising concerns about potential crop losses, said Joe Victor, analyst with Allendale Inc. in McHenry, Ill.

 

Technically inspired buying added to the bullish nature of the session, with the ability of the most active March futures contract to breach overhead resistance at major moving averages and the psychological US$10.00 level uncovering buying interest, traders said.

 

Meanwhile, lower crop potential for Argentina remained the focus of the market, as support from outside markets and solid export demand took pressure off prices.

 

Argentina on Wednesday cut its forecast for 2008-09 soy area to 16.5 million hectares from last month's forecast of 17.8 million hectares. Just 89% of the area initially expected to be planted with soybeans has been seeded to date and not much more is seen being planted.

 

"Due to the drought, planting expectations have abruptly declined, and the area planted so far is likely to be the total amount planted," the Secretariat said in its monthly crop report. In addition, rainfall is needed badly in the short term during the period potential crop yields are defined.

 

Cropcast Weather Services said heat and dryness will continue to cause stress for nearly two-thirds of both the corn and soybean belts in Argentina this week, as most of Buenos Aires, La Pampa, northern Entre Rios, northern & central Santa Fe and southern Cordoba remain unfavorably dry at the moment.

 

Some improvement is expected from a rain event during the coming weekend in key soybean areas of northern Buenos Aires, Cropcast forecasts. However, many of the showers will otherwise focus on the same areas that picked up last weekend's rainfall, and this could still leave at least a third of the soybeans unfavorably dry, Cropcast added.

 

U.S. soybeans inspected for export in the week ended Jan. 15 totaled 37.025 million bushels, up 37.2% from the previous week. Analysts surveyed by Dow Jones Newswires anticipated inspections in a range of 24 million to 37 million bushels. The primary destination for the soybeans was China, which accounted for 19.226 million bushels.

 

In pit trades, fund buying was estimated at 3,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures ended higher, with soymeal the upside leader of the products. Soymeal futures bounced near four-month highs, energized by technically inspired buying and the threat of lost Argentine production prospects, analysts said. March soymeal continued its rise, closing in on resistance at its 200-day moving average and the filling of a chart gap from Sept. 26.

 

Soyoil futures ended higher, feeding off strength in crude oil and the rest of the complex, but lost product share on spreads amid strength in soymeal.

 

March oil share ended at 34.68% and the March crush ended at 57 3/4 cents.

 

In pit trades, fund buying was estimated at 1,000 lots each in soymeal and soyoil.