February 23, 2010

 

CBOT Soy Review on Monday: Rally on technical buys, south American crop worries

 

 

Soy futures on the Chicago Board of Trade spiked Monday, posting double-digit gains on speculative buying amid South American crop worries and technical momentum.

 

CBOT March soy ended 16 1/2 cents, or 1.75%, higher at US$9.61 1/2 per bushel, and May soy settled 14 1/2 cents, or 1.52%, higher at US$9.69 per bushel.

 

Speculative funds were estimated buyers of 5,000 lots in soy, 1,000 lots in soymeal and 2,000 lots in soyoil.

 

Speculative traders covered previously sold positions, encouraged that a near-term low is in place. The inability of futures to attract follow-through selling in early trade attracted buyers, a CBOT floor analyst said.

 

The market was fueled by a short-covering rally, with light encouragement from weakness in the U.S. dollar aiding the advances, he added.

 

Meanwhile, concerns about heavy rains threatening Argentina's soy crop quality while delaying northern Brazil's harvest served as talking points to keep prices underpinned.

 

Otherwise, futures had little fresh fundamental influences to direct prices. The rally was seen as more technical in nature. Despite the South American crop concerns, southern hemisphere production is still viewed at record highs.

 

Prices remain confined within a consolidative trading range, with solid underlying demand keeping a floor beneath prices.

 

The U.S. Department of Agriculture reported 34.990 million bushels of soy were inspected for export in the week ended Feb. 18. The figure was at the high end of trade estimates ranging from 28 million to 35 million bushels.

 

The DTN Meteorlogix weather forecast said Argentina's central crop areas had heavy weekend rainfall of up to four inches. This heavy rain may have caused severe flooding in local areas early in the weekend. Rains, in general, will favor filling crops, but will be unfavorable for any early harvests.

 

In Brazil, less rainfall from Parana north to Mato Grosso will favor mature crops and harvest progress early this week. However, wet weather returns before long. with harvest delays likely developing, Meteorlogix said.

 

 

Soy Products

 

Soy product futures ended higher, climbing in unison with the strong gains in soy. Soymeal futures were also buoyed by technical momentum and concerns about tight pipeline supplies. The market managed to gain product value share on spreads, as traders adjusted the meal/oil spread relationship.

 

Soyoil futures ended higher, but emerged as the weakest link in the soy complex, influenced by the choppy theme in crude oil futures. The weight of meal/oil spreading limited the upside potential of soyoil, analysts said.

 

March soymeal settled US$5.30, or 1.92%, higher at US$281.70 per short tonne, and the May contract climbed US$5.70, or 2.11%, to US$275.70 per short tonne. March soyoil gained 31 points, or 0.80%, to 38.83 cents per pound, while the May contract settled 30 points, or 0.77%m higher at 39.30.

 

May oil share was 41.55%, while the May soy crush ended at 69 3/4 cents.