March 9, 2007

 

CBOT Soy Outlook on Friday: 1-2 cents higher on e-CBOT, "neutral" report

 

 

Chicago Board of Trade soybean futures are expected to open modestly higher Friday in tune with overnight gains and without a strong impact from a new government supply and demand report, analysts said.

 

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

 

In e-CBOT overnight trading, May soybeans rose 3 cents to US$7.62.

 

The U.S. Department of Agriculture on Friday morning released its March supply and demand report but did not adjust its estimate for U.S. soybean, corn or wheat ending stocks. Soybean carryout stayed steady at 595 million bushels.

 

Looking at the big picture, Mike Zuzolo, senior analyst with Risk Management Commodities Inc. in Lafayette, Ind., said the report was overall neutral for the markets and that the USDA's March 30 report on grain stocks and planting intentions would be more important.

 

Zuzolo noted the report could be seen as slightly bearish for soybeans because some analysts had expected the USDA to lower soybean carryout because of strong export business.

 

A Dow Jones Newswires survey of 15 analysts prior to the report's release showed the average estimate for carryout was 589 million bushels, down slightly from the USDA's February estimate of 595 million bushels.

 

"Exports have been so good the past six months of the marketing year that the USDA at some point will have to revise their export forecast higher and ending stocks lower or they are making an assumption that between now and August, exports will slow dramatically," said Brian Hoops, president of Midwest Market Solutions.

 

Several analysts surveyed also said they expected the USDA to increase production in South America because of favorable weather and early reports of high yields. The USDA on Friday increased its production estimate for Brazil to 57 million tonnes from 56 million and kept its estimate for Argentina steady at 44 million.

 

The USDA also increased world soybean stocks slightly to 57.5 million tonnes from 57.4 million.

 

"Overall the reports' numbers are so marginal," Hoops said. "The market will barely trade this report for five minutes."

 

At the opening, there should be some follow-through buying from the overnight session, floor traders said.

 

Bulls would regain some fresh upside technical momentum by filling on the upside last week's downside price gaps on the daily bar chart, a technical analyst said. That means pushing May prices back to US$7.93 1/2. The next downside price objective for the bears is closing prices below solid support at this week's low of US$7.39 1/2.

 

First resistance for May soybeans is seen at Thursday's high of US$7.65 1/2 and then at US$7.70. First support is seen at US$7.55 and then at US$7.50.

 

Looking at the weather, rain and thunderstorms in Argentina will maintain soil moisture for late filling crops, especially second crop soybeans, DTN Meteorlogix reported. Rainfall is unfavorable for any mature or maturing crops and early harvests, according to the weather firm.

 

In Brazil, there are no significant concerns for the mature crops and harvests in the north and central areas, Meteorlogix said. Thunderstorms will likely return to Rio Grande Do Sul by the weekend, maintaining soil moisture for the pod filling crop, despite the recent hot conditions, the firm reported.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Friday on long liquidation ahead of the USDA supply and demand report. Despite overnight gains at CBOT, an abundant domestic supply and the retreat of CBOT soybean futures from the highs triggered concerns of a possible downward correction, analysts said.

 

Soybean prices in China's major producing regions continued to rise in the week to Friday, but analysts and traders said further upside is very limited, given weak soymeal and soyoil prices.

 

Crude palm oil futures on the Bursa Malaysia Derivatives, meanwhile, ended mixed Friday after a sluggish trading day ahead of key developments expected in the coming week. Market activity has been slow all week long as participants have been content to bide their time until the release of important supply and demand data and the start of an annual industry conference Monday.

 

In other news, a total of 541 notices were placed against the CBOT March soybean future. Issuers were scattered among various commission houses. The Astro Division of UBS Securities was a big stopper, stopping 325 contracts. The last trade date assigned was March 8.