Chicago soyoil grabs grains spotlight in week

May 25, 2007

Once again, the soy complex — in particular soybeans and soybean oil — dominated the moves in Chicago ag markets this week, moving in line with soaring Asian vegetable oil markets. 
    “The world markets have come to forefront this week. We are going to be very nervous with the tight stocks and particularly the inflation situation in China, Europe and the United States,” said Gordon Linn, president of The Linn Group in Chicago.
    Many Chicago traders expected a correction in soy prices this week. But the Asian vegetable oil markets were red hot as demand for edible oils to meet food and fuel demand is escalating. Malaysian palm oil futures hit a nine-year high and the spot Chicago soyoil price pushed to near a 23-year top this week.
    Asia’s appetites tend to dazzle CBOT trading pits. There was talk among traders that China, India and Bangladesh bought huge amounts of soybean oil, roughly 150,000 tonnes, mainly out of Argentina, and that China also bought canola and rapeseed.
    Traders also continue watching U.S. Midwest weather as this is the time of year when any change in a forecast can move prices. One of Chicago traders’ favorite forecasters to watch is WGN’s Tom Skilling, a respected weather wonk whose noon updates are on TV’s all over the grain floor.
    Skilling on Friday had rain moving into the eastern U.S. Midwest which has been dry. If good rains move through, it should spell selling early next week, especially in corn.
    CBOT corn prices have been range-bound the past month as current estimates are projecting U.S. farmers to harvest their biggest crop in history — 13 billion bushels — if all goes well this summer.
    The government gave the corn crop high marks in its first ratings report of the year, grading 78 percent in good to excellent condition last Monday. USDA will update its ratings on Tuesday after the Memorial Day holiday, with traders expecting corn ratings to stay steady or drop slightly.
    But there’s a lot of time until October harvest so volatility is sure to pick up during what is expected to be the long hot summer.
    Wheat was on roll this week as worries about a tight global stockpile rallied prices. A combination of dryness in Europe and excessively wet weather in the key U.S. wheat state of Kansas has analysts shaving the world’s crop output.
    The same inputs will be watched next week: Asian vegetable oil markets, U.S. Midwest weather, crop condition ratings and European weather. It seemed that veteran grain traders had more on their minds that price volatility. They watched their shares of CBOT climb over $200 this month as the Chicago Mercantile Exchange and the IntercontinentalExchange Inc. wrangle over who will buy them. Next week should be telling as ICE’s CEO Jeffrey Sprecher will meet with CBOT members on May 31.

(Photo: U.S. Department of Agriculture, Scott Bauer)

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