August 22, 2008

 

CBOT Soy Review on Thursday: Rally holds on oil strength, falling dollar

 

 

Chicago Board of Trade soybean futures closed higher Thursday, driven by dramatic gains in crude oil and a weakening dollar.

 

September soybeans settled 47 1/4 cents higher at US$13.41 a bushel. The most actively traded November soybean contract ended 48 cents higher at US$13.48 after briefly touching the exchange-imposed 70-cent maximum trading limit, inspiring 5-cent gains on synthetic trades in the December.

 

By finishing above US$13.41, the bulls broke the solid technical-support level of the November contract outlined by a market technician earlier in the day. The November contract also finished above the 10-, 20- and 200-day moving averages.

 

December soymeal settled US$5.00 higher at US$358.70 per short tonne. December soyoil finished limit up, 250 points higher, at 56.35 cents per pound.

 

The ICE Futures U.S. Dollar index lost nearly 1%, trading down 0.769 point at 76.189 as crude oil sustained gains of more than US$5.

 

The chance of rain through the weekend has been factored into the market, and investors are waiting for less-than-anticipated precipitation levels to add bullish fuel, traders and analysts say.

 

Exports sales for new-crop beans are "well ahead of the last couple years," said Bill Nelson, an analyst at Wachovia. And despite China's net cancellations of 31,400 metric tonnes reflected in the U.S. Department of Agriculture's weekly export sales report released Thursday, old-crop sales are also ahead of the previous year.

 

As the eastern leg of the 2008 U.S. Pro Farmer Tour moved into east-central Iowa, participants noted unplanted fields, spotty, below-average pod counts and better soil moisture than seen on the first three days.

 

On the western leg of the tour, participants noted good vegetation on soybean plants in southwest Minnesota, a lack of moisture stress and solid pod counts.

 

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

 

The current Corn Belt forecast shows probable rains, "but widespread 1-inch amounts are necessary to alleviate dryness with 2 inches ideal," said Mike Tannura, T-Storm Weather president and meteorologist, noting 2 inches is very unlikely and 1 inch is not probable.

 

"Most of the anticipated rainfall for the coming week will be less than ongoing drying loss for the same period and therefore evoke little or no change in the total soil condition," said meteorologist David Salmon of Weather Derivatives. "I advised my subscribers last night to expect continued erosion of crop conditions, though hardly a famine."

 

Funds bought an estimated 6,000 contracts.

 

 

SOY PRODUCTS

 

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

 

December oil share ended at 43.99%, and the November/December crush ended at 61 cents.

 

Speculative funds bought an estimated at 2,000 lots in soymeal and bought 3,000 lots in soyoil.

 

Indonesia will lower its export tax on crude palm oil to 10% for September, down from the current tax rate of 15%, said a senior government official Thursday.

 

"Crude palm oil prices have fallen from highs of US$1,200 a metric tonne earlier this year to current levels of around US$850/tonne now, so the government will adjust the tax rate accordingly," said Bayu Krisnamurthi, deputy to Indonesia's coordinating minister for economy.

 

Krisnamurthi said Indonesia is poised to increase palm oil production in the next few years to produce 20 million tonnes of crude palm oil, while exports are expected at 15 million tonnes.

 

The lower crude palm oil tax should encourage purchasers to increase stocks in the expectation of increased exports.

 

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