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Opportunity for soybean sales, analysts say

Agriculture.com Staff 01/03/2006 @ 3:28pm

As soybean futures prices rally on the Chicago Board of Trade and local cash basis levels drop, farmers are being presented with a marketing opportunity, analysts say .

On Tuesday, CBOT March soybean prices finished 15 cents higher at $6.28 1/2 per bushel, a new high for the current rally.

Heat and dryness in the Argentina soybean-producing areas, plus technical investing in the soybean complex is underpinning the rally.

Don Roose, U.S. Commodities, told Agriculture Online on Tuesday that a widening cash basis from the CBOT futures price is one indicator some farmers are taking advantage of the rally.

"A month ago you could have sold soybeans at the local elevator at the same price of the CBOT futures price. Today, that local basis price is $0.20 per bushel below the CBOT January futures price (in Des Moines anyway)," Roose said.

Anne Frick, Prudential Securities, said the farmer is being given a gift with this price rally.

"Especially if they (farmers) intend to increase their soybean plantings in 2006 as I suspect will be the case," Frick said.

Because the market is being driven by index funds, a group of investors that trade mainly the long side of the market, Frick says the technical influence could last a while.

"Once they establish their position, they (index funds) are in there for the long haul," Frick said.

In addition, weather forecasts for Argentine's soybean region calling for dry conditions for the next few weeks could add bullishness for the soybean market, Frick said.

"The staying power for price support depends on how long it stays dry in Argentina. After a while traders might start thinking about last year's U.S. soybean crop that was thought to be very dry but ended up with high yields," Frick said.

Meanwhile, there could be bearish fundamentals in next week's USDA report that will include final U.S. crop production estimates for 2005 and updated supply/demand estimates.

"It's very likely those reports are going to be fundamentally bearish," Frick said. "I think it will be difficult once we get into the second half of January for the technical picture to continue to support prices if these fundamentals still look bearish."

As soybean futures prices rally on the Chicago Board of Trade and local cash basis levels drop, farmers are being presented with a marketing opportunity, analysts say .

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