February 9, 2007

 

CBOT Soy Outlook on Friday: 2-3 cents up on e-CBOT gains, bearish report

 

 

Chicago Board of Trade soybean futures are expected to start Friday's day session modestly higher as bearish new government estimates weigh on momentum from firmer overnight trade, sources said.

 

Soybean futures are called to open 2 to 3 cents higher per bushel.

 

In e-cbot overnight trade, March soybeans rose 7 3/4 cents to US$7.51 1/2.

 

The U.S. Department of Agriculture in a new supply and demand report increased its 2006-07 soybean ending stocks estimate to 595 million bushels from the 575 million forecast in January. The new estimate was above the average analyst guess of 569 million.

 

The USDA's world carryover estimate, meanwhile, increased from 56.15 million tonnes to 57.4 million.

 

The USDA lowered its U.S. soybean export forecast, it said, primarily because strong competition from South American countries and weaker-than-expected Chinese imports.

 

The numbers are negative for beans because it showed that stocks are larger than expected and that export business may not be as strong as some market participants believed, a trader said.

 

"The report was a little bit bearish for soybeans as the USDA increased the Argentine crop and U.S. exports were trimmed," said Bill Nelson of AG Edwards & Sons.

 

The USDA kept its production estimate for Brazil unchanged at 56 million. The estimate for Argentina's soybean production increased from 42.5 million to 44 million.

 

Conditions remain generally favorable for developing soybeans through the major growing areas of Brazil, although persistently wet weather in northern areas is causing and increase in soybean rust, the DTN Meteorlogix weather firm reported.

 

Brazil's good-looking soybean crop, in tandem with soybean prices that are on the upswing, are expected to help bail farmers out of the debt that they have accumulated over the past three seasons of drought and low prices, according to a new USDA attach¨¦ report.

 

In drastic comparison with previous years, yields will be boosted this year by a near-perfect combination of sun and precipitation so far, the attache report stated. Due to the wetter conditions, soybean rust has posed more of a threat this year, but remains well managed, the report added.

 

Losses due to the disease so far are minimal, it said.

 

In Argentina, meanwhile, cooler temperatures and some shower activity should limit stress to developing soybeans through central parts of the country, Meteorlogix said. More rain is needed, however, the firm added.

 

Looking at the technical charts for soybeans, the market still looks strong, a floor analyst added.

 

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

 

First resistance for soybeans is seen at the contract high of US$7.48 1/4 and then at US$7.52 1/4, he said. First support is seen at US$7.40 and then at this week's low of US$7.35.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled higher Friday after declining for three consecutive days, tracking gains in soybean contracts on the Chicago Board of Trade.

 

Soybean prices in China's major soybean-producing regions rose in the week to Friday, supported by rising soymeal prices.

 

In other news, India exported 535,756 metric tonnes of soymeal in January, 15.68% more than the same period of last year, an industry lobby group said. Total exports in the April 2006-January 2007 period were 3.17 million tonnes compared with 2.2 million tonnes in the same period of the last financial year.