May 24, 2006
CBOT Soy Review on Tuesday: Bounce higher; speculative buys, soyoil strength
Chicago Board of Trade soybean futures ended higher across the board Tuesday, bouncing back from previous losses on speculative buying amid strength from soyoil and oversold market conditions.
July soybeans ended 4 1/4 cents higher at US$5.86 3/4, July soymeal settled US$0.40 lower at US$171.80 a short tonne, while July soyoil ended 51 points higher at 25.43 cent a pound.
The market was buoyed by soyoil and its supportive relationship to crude oil futures, with oversold conditions providing enough of a spark to bounce prices higher, said Dan Basse, president AgResource Company in Chicago.
Futures were able to consolidate prior losses, with technically related buying, the unwinding of wheat/soybean spreads, firm outside influences and positioning heading toward the long holiday weekend enabling futures to divorce themselves from weakness in neighboring grain futures, traders added.
The supportive theme was consistent from the outset, with broad-based commodity-wide strength generating fresh momentum. The soybean market had lagged behind the strength seen in other CBOT grain futures and played a little catch up off oversold conditions, said a CBOT commission house broker.
Heading into the session, the relative strength index for July soybeans stood at 29.72. A RSI reading below 30.00 is considered oversold.
However, the inability of the market to attract follow-through buying at the highs coupled with a turn-around in wheat returned market focus to record projected ending stocks and weather ideal for early crop conditions to produce a midday slide, analysts added. Nevertheless, the market regained its price strength down the stretch, with the supportive element of rallying soyoil futures attracting late buyers.
Meanwhile, the DTN Meteorlogix weather outlook said rainfall will move from west to east across the Midwest during the next three days. Rainfall will total up to one inch, with the best chance for heavier precipitation in eastern South Dakota, Minnesota and northern Iowa. Temperatures will range from normal to above normal for the season. Crop weather will generally be favorable for the Midwest; however, the western sector of the region (Nebraska, western Iowa, northern Missouri) may have some crop stress due to lighter rainfall amounts and very warm temperatures, Meteorlogix added.
In pit trades, JP Morgan bought 800 July, Goldenberg Hehmeyer and ABN Amro each bought 500 July, and Fimat and Man Financial each bought 300 July.
On the sell side, Calyon Financial sold 1,200 July, Fortis sold 1,000 November, UBS Securities sold 500 November, DT Trading sold 400 July, and ADM Investor Services sold 300 July. South American soybean futures ended higher, with the July future settling 3-cent higher at US$5.92 1/2.
Soyoil futures emerged as the leader of the soy complex Tuesday, charging higher on speculative buying tied to bullish biodiesel enthusiasm associated with rallying crude oil prices, analysts said. Technical buying aided the climb, with prices boosted by a speculative push after the July futures climbed above Friday's session high, traders added.
Soymeal futures ended a two-sided session with modest declines, stumbling lower on soyoil/soymeal spreading activity. Soymeal has taken on the role of a follower, with declining domestic and export demand failing to provide a fundamental spark for the market, analyst said.
July oil share ended at 42.53%, and the July crush ended at 71 cents.
In soymeal trades, JP Morgan bought 1,000 July and Bunge Chicago bought 300 December. Man Financial sold 500 July and 300 December, Rosenthal sold 600 July, and Fimat sold 400 July.
In soyoil trades, Man Financial bought 300 December, and JP Morgan bought 400 July and 500 August, with speculative buying scattered among various commission houses. Bunge Chicago sold 300 July, with Prudential Financial, RJ O'Brien and Tenco featured sellers.