September 23, 2008


CBOT Soy Review on Monday: Soars; inflationary signals spark rally



Chicago Board of Trade soybean futures soared Monday, as inflationary-based commodity buying triggered a speculative-led bounce.


November soybeans ended 61 1/2 cents higher at US$12.05.


December soymeal settled US$12.50 higher at US$328.00 per short tonne. December soyoil finished 263 points higher at 50.03 cents per pound.


A big part of the day's rally was short covering, as speculative buyers returned to commodities on inflationary fears with a surge in crude oil and precious metals and weakness in the U.S. dollar sending sellers running for cover, said John Kleist, broker/analyst Allendale Inc.


Inflationary signals induced traders to reacquire hard assets on fears that paper money will be worth less, and that is supportive to commodities, analysts said.


Bullish underlying fundamentals aided the gains as well, with very tight nearby supplies and the uncertainty of 2008 yields and finishing weather supportive to prices, analysts added.


However, "it remains to be seen if this will be a renewed push by index funds to produce another counter seasonal harvest rally like we have seen in the past two years," Kleist said. Bullish psychology was overwhelming today, but with volatility in outside markets a clear path of direction is remains uncertain, he added.


Meanwhile, tight nearby supplies are hampering U.S. soybean exports and keeping cash prices strong because of the tug of war for the legume by both exporters and crushers. Sluggish export movement is normally a bearish sign for the U.S. soybean market, but the slow start to 2008-09 marketing-year shipments is perceived bullish.


For the week ended Sept. 18, the U.S. Department of Agriculture reported 1.204 million bushels of soybeans were inspected for export, down 85.9% from the previous week and down 93.5% from the same period a year ago.


Accumulated soybean export inspections in the 2008-09 marketing year were 10.833 million bushels, a 71.6% drop from the 38.123 million bushels at the same time last year.


The DTN Meteorlogix Weather Service forecast calls for temperatures through the end of the week again to trend above to much-above normal. This warm temperature outlook is another factor in favor of crop progress and maturation going into the last of the month.


Meanwhile, U.S. and European forecast models show a big difference in their outlooks for the weather pattern across the Midwest during next week. The European model continues to show mild weather for the Midwest. In contrast, the U.S. model calls for a shot of cold air, with possible freezing temperatures, to move into the Midwest, Meteorlogix added.


In pit trades, speculative fund buying is estimated at 4,000 lots.





Soy product futures spiked higher, with soyoil the upside leader on spillover support from a surge of crude oil and soybeans. Speculative-led buying fueled the bounce, with inflationary-based buying helping soyoil regain product share, analysts say.


Crude oil is linked to soybeans because funds often trade commodities in a basket and because biodiesel is made from soyoil.


December oil share ended at 43.27% and the November/December crush ended at 67 cents.


Speculative fund buying was estimated at 1,000 lots in soymeal, while speculative funds were estimated buyers of 2,000 lots in soyoil.


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