Soybean Oil Analysis ended 19.10.2004

Fund short covering and buying pushed soybean futures to a firmer close Tuesday at the Chicago Board of Trade, with the

market taking out last week's high and closing a downward gap from a week ago.

Soy products closed firmer, too, also finding strength from fund purchases.

"Beautiful" "very nice" and "looked good" were some of the phrases thrown around about Nov soybeans' rally on Tuesday, particularly when analysts and traders mentioned the move to close last week's gap as measured on day-only technical charts.

Several traders said because the market closed near session highs, There's a good chance the rally could continue into wednesday's session. .Nov soybeans settled up 13 cents at $5.27 3/4 a bushel. Dec soyoil ended up 58 points at 20.67 cents a pound. Dec soymeal ended up $2.70 at $156.80 a short ton.

The fund activity was seen from the onset of trade and lent support throughout the session. Funds were said to have purchased about 3,400 contracts on Tuesday. While not huge business, traders will watch to see if funds plan on continuing this activity Wednesday.Funds have a lot to do - they're short a lot of soybeans - before first notice day between now and Oct. 29, said Vic Lespinasse, floor broker for A.G. Edwards. In order to avoid taking delivery of physical beans, market participants with positions in Nov would have to exit those positions or roll them to the Jan contract.

Funds are known to be short soybeans, so any change in that position would spur further gains in the market. "The funds got a little oversaturated with being short, so it's not surprising if this was short covering," a longtime grain analyst said.

Tuesday's rally pushed soybeans through last week's high and popped into the large downside gap created a week ago after the October crop production report. Basis Nov contract, the gap ran from $5.29 to $5.18.

The rally adds even further credence to the bullish argument of a seasonal low for the market, some traders said. Like Mr. Rogers said, 'Can you say harvest lows?'" the grain analyst said. "We're building a good demand base here and we probably have some room to rally. I don't think it's going go very far. With soybean harvest pegged at 71% done by the U.S. Department of Agriculture, traders said the market can now put that pressure aside. "We now have other things to worry about and the question remains if this will be the harvest lows, or something else," the grain analyst said.

Some support for soybeans also came from firmer basis bids at the Gulf, cash sources said, as barge business slowed.In other news, Argentina's soybean crush totaled 2.134 million metric tons in August, the latest Agriculture Secretariat data show, down 5.2% from the same month a year earlier.

SOY PRODUCTS

Both markets traded firmer for much of the day, with soymeal leading the complex.

The rally in soybeans also inspired strength in Dec soymeal, with that market eating away at its own downward gap on daily price charts. Soymeal's gap ran from the Oct. 11 low of $163.30 to Oct. 12 high $156.50.

Much like in soybeans, soymeal saw fund short covering, traders said. Dec soyoil was the only market not to break out of last week's high of 20.64 cents. As it did on Monday, soyoil lagged soymeal, but did trade firmer on Tuesday.

In soymeal, CIS bought 400 Dec, and Iowa Grain bought 100 May, 200 Jly 100 aug and 100 Sep. Other buyers were scattered. Sellers included Cargill selling 100 Dec, 200 Jan and 200 Mar, and Tenco selling 200 Dec.

In soyoil, CIS bought 300 Jan, while other buying was scattered. Citigroup sold 200 Dec and there was other scattered selling.

Floor traders said intramarket spreading was a feature in soyoil, and some said it could be early rolling of positions from Dec to Jan.

Source : Dow jones