February 8, 2007

 

CBOT Soy Outlook on Thursday: Flat-down 2 cents; sideways ahead of report

 

 

Chicago Board of Trade soybean futures are expected to start Thursday's day session steady to slightly weaker on momentum from the overnight, although trading will likely turn sideways ahead of the release of a new supply and demand report, analysts said.

 

Soybean futures are called to open flat to 2 cents lower per bushel.

 

In e-cbot overnight trade, March soybeans were down 1 3/4 cent to US$7.39 1/4.

 

Follow-through selling from overnight and some profit-taking may drag soybeans down early in the session, a source said. With no fresh news out, traders looked to crude oil futures for direction and prices trended lower under spillover pressure, he added.

 

Trading, however, will likely be sideways ahead of Friday's release of a U.S. Department of Agriculture supply and demand report, sources noted.

 

"You've got the USDA report tomorrow so there are plenty of arguments for keeping this thing sideways," said John Kleist, senior analyst with Top Third Ag.

 

Some support will likely come from stronger-than-expected weekly soybean export sales, a trader noted.

 

The USDA reported sales for the week ended Feb. 1 totaled 803,200 metric tonnes, above analysts' estimates of 450,000 to 700,000 tonnes. The sales were 19% above the previous week and 8% over the prior four-week average, according to the USDA.

 

The major buyers were China, which took 333,100 tonnes; Mexico, which bought 213,700 tonnes; and Turkey, which bought 100,000 tonnes.

 

Soymeal and soyoil export sales were within estimates at 135,300 tonnes and 2,900 tonnes, respectively. Analysts had predicted soymeal sales of 75,000 to 200,000 tonnes and soyoil sales of zero to 10,000 tonnes.

 

There also is continued bullish talk among traders about possible soybean acreage loss this spring due to increased corn planting, sources said.

 

"It certainly seems that the strength we've seen in the beans was not only the acreage argument but also we're been seeing pretty good export demand, as well," Kleist noted.

 

From a technical perspective, bulls still have solid upside momentum on their side, a technical analyst said. He agreed traders are looking ahead to Friday morning's USDA supply and demand report.

 

The report will include new estimates on U.S. soybean carryover and global soybean production.

 

The next major upside price objective for the soybean bulls is to close prices above solid chart resistance at the 2005 high of US$7.52 1/4, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$7.20.

 

First resistance for is seen at Wednesday's contract high of US$7.48 1/4 and then at US$7.52 1/4. First support is seen at this week's low of US$7.35 and then at US$7.30.

 

Looking at the weather, forecast models have backed off the prediction of widespread thunderstorms in Argentina during the Sunday-Monday period, although that could change again by Friday, according to the DTN Meteorlogix weather firm.

 

Recent hot, dry weather in the major growing areas of central Argentina have decreased soil moisture and increased stress on the developing crop, the firm said.

 

In Brazil, there are no significant concerns for the crop at this time, except for the possibility of more than average soybean rust, Meteorlogix reported.

 

Brazil should harvest a record 56.3 million metric tonnes of soybeans in the 2006-07 crop, the National Commodities Supply Corp., or Conab, said Thursday. As expected, the estimate is higher than the 54.9 million tonnes forecast last month. Conab's crop estimate, however, remains the most conservative of all current crop estimates for the 2006-07 soy crop. On Wednesday, the government statistics bureau, IBGE, put the crop at 56.4 million tonnes and the Brazilian Vegetable Oils Industry Association, or Abiove, put it at 57.1 million tonnes.

 

Over the last several weeks, new occurrences of Asian soybean rust have been found throughout the south and center-west soy belt. Until now, no productivity losses have been reported.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled mostly lower Thursday amid a cautious market ahead of the Friday release of the USDA supply and demand report, traders said. "The market is concerned of any unexpected data from the report," a trader said.

 

Crude palm oil futures on the Bursa Malaysia Derivatives also ended lower Thursday amid speculation that the USDA report would contain bearish numbers, a source said.