February 7, 2007

 

CBOT Soy Outlook on Wednesday: 1-2 cents higher on stronger overnight tone

 

 

Chicago Board of Trade soybean futures are expected to start Wednesday's day session higher on follow-through buying from firmer overnight trade and amidst position-evening ahead of a crop report, sources said.

 

Soybean futures are called to open 1 to 2 cents per bushel higher.

 

In e-cbot overnight trade, March soybeans were up 1 3/4 cents higher at US$7.40 1/2.

 

There was little fresh news out overnight, but market participants are looking ahead to a U.S. Department of Agriculture supply and demand report scheduled to be released Friday, CBOT floor sources said. The report will include a new estimate on soybean ending stocks.

 

Traders are evening up positions ahead of the report in the event of any bullish surprises, a floor source said.

 

There is also the potential for some technical selling Wednesday after soybean futures retreated from gains and closed lower Tuesday, a source noted.

 

Still, the market is likely to keep its focus on a battle with corn over 2007 acreage, analysts said.

 

Soybean bulls have arguably taken over leadership of the grains complex, possibly because of fears that there will be a sharp reduction in U.S. soybean acres planted this spring, a technical analyst added.The bulls have solid upside momentum on their side, he added.

 

The next major upside price objective for the bulls is to close prices above solid chart resistance at the 2005 high of US$7.52 1/4. The next downside price objective for the bears is closing prices below solid support at US$7.00.

 

First resistance for March soybeans is seen at US$7.46 3/4 and then at US$7.52 1/4. First support is seen at US$7.35 and then at US$7.30.

 

Looking at the weather, the next, best chance for scattered thunderstorms in Argentina appears to fall in the period from Sunday night and Monday into Tuesday, according to DTN Meteorlogix.

 

Recent hot, dry weather in the major growing areas of central Argentina decreased soil moisture and increased stress on the developing crop, the weather firm noted. Scattered showers and cooler temperatures this week, however, should ease the stress, Meteorlogix said.

 

In Brazil, there are no significant concerns at this time, except for the possibility of seeing more soybean rust than normal because of wetness, Meteorlogix reported.

 

Brazil should harvest 56.4 million metric tonnes of soybeans in the 2006-07 crop, the Brazilian Census Bureau, IBGE, said in their first estimate for the season on Wednesday. That is 8% greater than the 52.2 million tonnes harvested in the 2005-06 crop.

 

IBGE's estimate is lower than private estimates made Tuesday by farm consulting group, AgRural, which put the crop at a record 57.5 million tonnes.

 

The Brazilian Vegetable Oils Industry Association, or Abiove, raised its expectations for the 2006-07 soy crop to 57.1 million tonnes, topping its Jan. 11 estimate by more than 1.3 million tonnes. The crop is currently being harvested.

 

Abiove also raised its expectations for Brazil's market year 2007-08 soy crush. The news estimated of 28.8 million tonnes is slightly higher than the 28.2 million tonnes Abiove estimated on Jan. 11.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Wednesday as the market consolidated following a recent rise.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended marginally higher Wednesday after a dull trading day, as most participants took a breather after witnessing volatile price movements in recent days. Traders said the market's failure to establish any clear trends and the lack of fresh fundamental developments sapped trading interest.

 

In related news, Indonesia's PT Astra Agro Lestari said it sold 4,000 metric tonnes of crude palm oil and super crude palm oil offered at an auction Wednesday. Indonesia's PT Perkebunan Nusantara said it sold 1,500 metric tonnes of crude palm oil offered at a government auction.

 

India's recent cut in the import duty on crude palm oil, meanwhile, has provided little relief to the domestic vanaspati industry, which is still struggling to cope with an influx of cheaper product from neighboring countries, a senior industry official said. Vanaspati, a type of solid cooking fat that's popular in India and surrounding countries, is made from crude palm oil through a hydrogenation process.