August 21, 2008


CBOT Soy Review on Wednesday: Rally strength in weather, outside markets



Chicago Board of Trade soybean futures closed higher Wednesday on support from outside markets, weather-related uncertainties and unrest in Argentina.


September soybeans settled 26 3/4 cents higher at US$12.93 3/4 a bushel. The most actively traded November soybean contract ended 24 cents higher at US$13 1/2, after trading as low as US$12.76.


December soymeal settled US$6.20 higher at US$353.70 a short tonne. December soyoil finished 67 points higher at 53.85 cents a pound.


Traders noted the day's volume was thin.


"There's a market saying: Never sell into a quiet market because of lack of liquidity," a CBOT floor trader said.


Outside markets also saw gains. The U.S. dollar, gold and silver were all up. Crude managed a return to positive territory after higher-than-expected oil inventories caused it to drop earlier Wednesday. The rebound added extra support to grains and soy.


Though anticipation of scattered showers over the next few days fueled some bearish sentiment, traders are generally cautious that tight fundamentals, extended dryness and variable crop conditions would provide solid support.


"Soybean fundamentals are bullish," said Bill Nelson, an analyst at Wachovia, on the soybean outlook.


Despite record prices in the 2007-2008 crop year, "soybean exports may reach a record at 1.145 billion bushels," he added.


Analysts estimated export sales for the week ended Aug. 14 would range from 200,000-600,000 metric tonnes. Export sales in the prior week totaled 69,500 tonnes. The U.S. Department of Agriculture will release its weekly export sales report at 8:30 a.m. EDT Thursday.


"If the 2008 crop turns out much larger than expected, there is downside risk to US$11.50 (cash price), (but) uncertainty about the South American soybean crops will support prices," Nelson said. "Upside price risk is to US$15.00 if weather, crop pests, or South American problems threaten production in either hemisphere."


Argentina's farmers plan a large rally on Aug. 30, but no strikes have been announced.


"The Argentina situation continues to keep support under our market," a CBOT floor trader said.


In addition to questions about the reliability of immediate supply from Argentina, lack of response to farmers' concerns over squeezed profit margins provides a disincentive to soybean planting, he said.


Meanwhile, moving from central Illinois through Warren County, 2008 U.S. Pro Farmer Tour participants noted an average soybean pod count of 1,315 in three-foot-by-three-foot plots measured in four fields. The group noted dry fields and one scout said a field with a relatively high pod count could vary in yield by as much as 10 bushels depending on whether it rains soon.


On the western leg of the tour, participants noted consistent soybean plant condition with high pod counts. Aphids and some bean leaf beetles were observed, but the crop looks to be a good, average crop overall, scouts said. But it was noted that the crop could use some rain in the next week to 10 days.


At 10 a.m. EDT Friday, Pro Farmer will release a crop estimate, which is based in part on tour participants' calculations.


Elsewhere, widespread rains in the Delta aided soybeans, while the lack of excessive heat is masking the extent full extent of the Corn Belt's dry conditions, said Mike Tannura, T-Storm Weather president and meteorologist.


Scattered rains are forecast to hit the Midwest over the next few days, but at around a half an inch, the showers aren't expected to fully replenish soils and dependent crops.


Funds had bought an estimated 4,000 contracts.





Soy-product futures followed the soybean rally Wednesday. Soyoil drew additional support from higher palm oil prices, traders and analysts said.


December oil share ended at 43.22% and the November/December crush ended at 70 1/2 cents.


Speculative funds bought an estimated at 1,000 lots in soymeal, and bought 2,000 lots in soyoil.


Analysts expect Thursday's USDA export sales report to reflect 50,000-200,000 metric tonnes of soymeal and 0-20,000 metric tonnes of soyoil sold. Last week 96,400 metric tonnes of soymeal and 37,500 metric tonnes of soyoil were reported.


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