April 28, 2006
CBOT Soy Review on Thursday: Soyoil rally ignites late soybean buying
Chicago Board of Trade soybean futures closed narrowly mixed Thursday, as prices found late support from a rally in soyoil that ignited late buying and took prices off of their lows and into slightly higher territory by the closing bell.
May soybeans lost 1/2 cent to US$5.75 1/4 while most active July gained 1/2 cent to US$5.90 1/2.
Speculators were the dominant influence in the grain and soy complex markets.
"The funds are reluctant to do shorts, as far as beans and meal are concerned, after they just rallied out of a lot of them. Plus, they're long oil and they continue to add to the oil," said independent analyst John Kleist.
No aggressive selling in soybeans - though funds as of 1:30 p.m. EDT were net sellers of 4,000 bean contracts - also allowed prices to rally late, he said.
Beans mainly benefited from spillover buying in the oil pit, though the latest Census Bureau crush report was friendly for market bulls at 150.4 million bushels, versus 136.3 million in February, and higher than most trade estimates.
Any positive effect from the crush, however, was overshadowed by news that China raised key interest rates by 27 basis points, sparking concerns of a demand slowdown. However, most analysts see mostly a short-term effect, if any, on the market.
Bill Nelson, associate vice president at A.G. Edwards in St. Louis, said he expects mostly a "psychological" impact on the market that may result in a short-term slowdown in prices, based on the market's reaction to China raising rates in late 2004.
However, China is a dominant player in the U.S. export arena, so any slowdown would likely be negative for prices.
Kleist, who also sees a limited effect on the market, argued that China has already curtailed its purchases of U.S. soybeans given weekly export reports that pegged sales at new marketing-year lows the past two weeks.
Soybean export sales for the week ended April 20 were 111,400 metric tonnes, down 43% from the previous week and 60% below the prior four-week average, the U.S. Department of Agriculture reported.
China was notably absent from the sales report again this week. Instead, Japan, Taiwan and Mexico were the top customers.
Rand Financial sold 1,000 July beans, ABN Amro sold 700 July, Fimat sold 500 July, Merrill Lynch and Citigroup Global Markets each sold 400 July, while Refco, Man Financial and Calyon Financial each sold 300 July.
As of 1:30 p.m. EDT, funds had sold a net 4,000 soybean contracts.
ADM bought 800 May beans, J.P. Morgan bought 500 July, Bunge bought 400 July, Goldenberg Hehmeyer bought 300 July, and Tenco bought 300 November.
CBOT soy product futures closed mixed Thursday. Soyoil rallied to 10-month highs and meal closed lower along with weakness seen in soybeans for most of the session and on spreading activity.
July soyoil gained 45 points to 25.65 cents, while July soymeal lost US$1.70 to US$171.90 a short tonne.
Traders cite strong oil/meal spreading and bullishly construed data in the Census Bureau crush report as triggering buying interest in soyoil. Soyoil stocks at 2.7 billion pounds, under some trade expectations, were considered friendly for the market.
Ongoing interest in fuels such as biodiesel as an alternative to petroleum-based energy products also supported soyoil prices.
In oil, Tenco bought 1,800 July, Man Financial bought 1,700 July, Term Commodities bought 1,000 December and Fimat and Citigroup each bought 500 July. Rand Financial sold 2,500 July, Bunge sold 500 July and ADM sold 500 December.
Funds were net buyers of 3,600 oil contracts as of 1:30 p.m. EDT and net sellers of 3,500 meal contracts.
Meal closed lower simply because the buying paper was concentrated in oil. "Funds are buying oil, they're not buying meal," Kleist said.
Soymeal stocks were pegged at 257,860 tonnes in the March crush report, versus February's 266,030 tonnes and under most trade estimates. Soybean export sales for the week ended April 20 were 111,400 metric tonnes, down 43% from the previous week and 60% below the prior four-week average. The sales also set a low point for the 2005-06 marketing year.
China was notably absent from the sales report. Instead, Japan, Taiwan and Mexico were the top customers.
Iowa Grain sold 1,200 July meal, O'Connor sold 1,000 July, and Man Financial and Fimat each sold 400 July. J.P. Morgan bought a net 700 July, ADM bought 500 July, Bunge bought 200 May and a net 300 July, and Refco bought 400 September.