SOYBEANS: Soybean futures spiked Monday, rising to double-digit gains on speculative buying amid South America crop worries and technical momentum. Speculative traders covered previously sold positions, encouraged that a near term low is in place, with the inability of futures to attract follow through selling in early trade attracting buyers, a CBOT floor analyst said. The market was fuelled by a short covering rally, with light encouragement from weakness in the U.S. aiding the advances, he added. Meanwhile, concerns about heavy rains threatening Argentina soybean crop quality while delaying northern Brazil's harvest kept prices underpinned. March soybeans ended 16 1/2 cents, or 1.75%, higher at $9.61 1/2 a bushel, and May soybeans settled 14 1/2 cents, or 1.52%, higher at $9.69.

Here is an additional short comment from Bloomberg citing China's continued supply deficit:

China's demand for import soybeans will remain "huge and irreversible," Han Jun, director of the rural economy department at the Development Research Center of the State Council, said at a press conference in Beijing today. China cannot ensure self-sufficiency in all agricultural products and it has made it a state policy to import, he said.

Eoin Treacy's view While the energy, industrial and precious metals sectors have all rallied impressively over the last year, the agriculture sector has been more hit and miss. Soft commodities such as sugar and cocoa had been notable outperformers (more on sugar below), but the grain and bean sector has been unable to attract the support necessary to fuel anything more than short-term rallies. Prices remain rangebound having found support at the upper side of the previous long-term bases.

Soybeans has been one of the better performing grains, while rough rice has until recently been a relative strength leader. Soybeans found support in December 2008 and while it has been unable to sustain upward breaks, it has held a progression of incrementally higher or equal lows over the last 15-months. It rallied from 900¢ earlier this month and is currently experiencing a little difficulty below 1000¢. A sustained move back below 900¢ would be required to hinder potential for further higher to lateral ranging, while a decline below 800¢ would question the base building hypothesis.

Oats shares a relatively similar pattern to soybeans, with a similar progression of higher reaction lows from the March 2009 lows. It found support above 220¢ in late January and continues to hold above that level. A sustained move below 225¢ would now be required to question scope for additional higher to lateral ranging.

Both corn and wheat continue to trade within relatively well defined ranges and a sustained breakout to the upside would be required to signal that demand has regained the upper hand beyond the short term.

Rough rice's advance was capped with a weekly key reversal in mid-December and it has since pulled back to test the 10-month progression of higher reaction lows and the 200-day moving average. It needs to rally successfully from this area if the medium-term bullish outlook is to remain credible.