June 27, 2008

 

CBOT Soy Review on Thursday: Rallies on midwest rains, inflation worries

 

 

Chicago Board of Trade soybean futures spiked Thursday, with new crop futures setting new contract highs, rallying on Midwest weather concerns and inflationary based buying.

 

July soybeans settled 36 3/4 cents higher at US$15.74 1/4 and November soybeans ended 36 1/2 cents higher at US$15.62. December soymeal settled US$9.50 higher at US$405.70 per short tonne. December soyoil finished 148 points higher at 67.46 cents per pound.

 

Heavy Midwest rains served as a catalyst to encourage traders to add a risk premium to prices, said Mike Zuzolo, senior grains analyst with Risk Management Commodities Inc. in Lafayette Ind.

 

The rains have sparked concerns of acreage losses amid the threat that some fields may not dry out in time and achieve enough yield potential to entice farmers into planting at a late date.

 

The market was also buoyed by inflationary based buying attributed to weakness in the U.S. dollar, which gave speculative buyers the "green light" to get back in the market, with broad-based buying seen across commodities in general, Zuzolo added.

 

Meanwhile, the uncertainties of the market remain an underpinning theme, as the unknowns of acreage and future demand are bullish influences holding sellers at bay, analysts added.

 

Technical momentum aided to the bullish cause, with market bulls encouraged by the market's ability to rise above major moving average resistance and new crop contracts eclipsing previous highs, traders said.

 

The DTN Meteorlogix forecast said in the period from Tuesday night through Thursday morning, the mid-Mississippi River basin has taken in from 3 to 8 inches of rain, resulting in new flooding.

 

The forecast calls for rainfall of up to an additional 2 inches across the region to finish out the week. This rain will keep soils saturated, and may result in some renewed flooding. In addition, field work and replanting efforts will be held back by the rainfall, Meteorlogix reports.

 

Looking ahead, the U.S. Department of Agriculture is expected to show a modest decrease in soybean seedings from its March prospective plantings report with soybean stocks as of June 1 reflecting solid third-quarter usage in its reports scheduled for release at 8:30 a.m. EDT (1230 GMT) Monday.

 

Analysts surveyed by Dow Jones Newswires estimate average soybean acreage at 74.203 million acres, down 590,000 acres from the March projection of 74.793 million. The estimates from the 18 analysts surveyed ranged between 71.965 million and 76.000 million acres. USDA is expected to report soybean stocks at 669 million bushels in its quarterly Grain Stocks report. Estimates ranged from 615 million to 743 million. Stocks as of March 1 totaled 1.428 billion bushels.

 

In pit trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 4,000 lots.

 

 

SOY PRODUCTS

 

Soy product futures soared along with soybeans, fueled by broad-based commodity buying and the bullish prospect of tightening supplies amid weather issues for the 2008 soybean crop, analysts said. Technically based buying fueled gains in the soy products, with advances accelerating amid the ability of futures to surpass overhead moving average resistance, traders said. Soyoil garnered additional support from rallies in crude oil and strong underlying demand, traders added.

 

December oil shares ended at 45.40% and the November/December crush ended at 73 cents.

 

In soymeal trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 2,000 lots.

 

In soyoil trades, buyers and sellers were scattered among various commission houses, with speculative fund buying estimated at 3,000 lots.

 

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