August 13, 2008
CBOT Soy Review on Tuesday: Bounces on crop estimates, technical conditions
Chicago Board of Trade soybean futures settled higher Tuesday, climbing on speculative-led buying attributed to supportive crop estimates and technically oversold market conditions.
August soybeans settled 5 cents higher at US$12.20 and November soybeans ended 18 cents higher at US$12.18.
December soymeal settled US$11.50 higher at US$332.00 per short tonne. December soyoil finished 67 points lower at 50.78 cents per pound.
The U.S. Department of Agriculture provided fresh fundamental support for the market, with lower-than-expected yield and production forecasts pulling buyers off the sidelines, analysts said.
The uncertainties of yield and production amid the late development of the 2008 soy crop encouraged traders to add some premium back into prices. Analysts say the crop will remain vulnerable to late-season weather risks later than normal due to late plantings.
Technically oversold market conditions attracted chart-based buying to cement the session's advances, with active contracts filtering into chart gaps resting in the market since Friday, analysts added.
The market was overdue for a bounce following a recent price break that trimmed more than US$4.00 in risk premium from prices, traders said. Weather conditions remain favorable for developing crops, consistent with outlooks for yield estimates to rise in the government's September report, but after steep declines, the market has discounted those influences already, said Vic Lespinasse, analyst with grainanalyst.com.
Nevertheless, the trade is expected to continue to take a cautious approach to market activity in the next four weeks amid tight projected ending supplies, and the lingering threat of weather on yields. However, the market is expected to provide some stimulus to encourage Brazil and Argentina to ramp up soybean production.
The USDA estimated, based on the first field surveys of U.S. crops, that 2008-09 soybean production would total 2.973 billion bushels, down from the July estimate of 3.000 billion. The average of analyst estimates anticipated a crop size of 3.003 billion bushels. The 2008-09 U.S. soybean yield was estimated at 40.5 bushels per acre, down from July estimate of 41.6.
The DTN Meteorlogix forecast calls for a widespread rain event over the Plains, northern and western Midwest, and the Delta through Deep South during the balance of this week. Rainfall will total up to 5 inches in the southern Delta, with over an inch of moisture indicated from Texas north into the Dakotas, Minnesota and Iowa. Daytime temperatures over the entire central U.S. will range around 5 degrees Fahrenheit below average through the end of the week.
Speculative fund buying was estimated at 3,000 lots.
Soy-product futures ended mixed, with soymeal bouncing in unison in soybeans. Soymeal garnered added strength from technical buying, as futures were buoyed by oversold conditions, analysts said. Soyoil futures stumbled lower, pressured by the negative influence of continued disinvestment in the energy sector, and meal/oil spreading, traders said.
December oil share ended at 43.34% and the November/December crush ended at 75 cents.
Speculative fund buying was estimated at 1,000 lots in soymeal. Speculative fund selling was estimated at 2,000 lots in soyoil.