March 11, 2008

 

CBOT Soy Outlook on Tuesday: Up 20-25 cents; outside markets, USDA S/D data

 

 

Chicago Board of Trade soybean futures are seen climbing in early day session trade Tuesday, recovering from a recent corrective setback on strength in outside markets, and supportive supply and demand data.

 

CBOT soybean futures are called to start the session 20 to 25 cents higher.

 

The combination of record high crude oil futures and higher metal prices are expected to generate broad based inflationary buying in commodities, and with confirmation of tightening domestic ending stocks, soybeans are poised for a sharply higher start, analysts said.

 

The firm overnight prices are serving as a guide for early direction, with the exhaustion of speculative long liquidation coupled with good underlying commercial buying buoying prices, analysts added.

 

Meanwhile, supportive U.S. Department of Agriculture supply and demand data is providing a fundamental boost to keep a bullish underlying theme in the market, traders said.

 

The USDA cut 2007-08 U.S. soybean ending stocks by 20 million bushels to 140 million from the 160 million bushels forecast in February, and below the average analyst guess of 153 million bushels.

 

The USDA raised U.S. exports by 20 million bushels to 1.025 billion bushels. USDA said the higher exports reflected strong sales, especially to China, and reduced exports from Brazil.

 

"The domestic balance sheet data for soybeans is quite constructive, with the USDA acknowledging and confirming trade assumptions that soybean export sales are doing very well," said Bill Nelson, grains analyst with Wachovia Securities in St. Louis, Mo.

 

U.S. soyoil ending stocks were estimated at 2.837 billion pounds, up from 2.502 billion. Soyoil production was raised due to an increase in the oil extraction rate, USDA reported. Domestic soyoil use was cut due to lower projected use for biodiesel. However, soyoil exports were raised, reflecting strong sales and shipments through February, USDA reported.

 

The USDA raised Brazil's 2007-08 soybean production by 500,000 tonnes to 61 million tonnes and left Argentina's production estimate unchanged at 47 million tonnes. World ending stocks were increased to 47.44 million tonnes, up from 45.82 million in February.

 

The world numbers are a bit bearish, but market attention will focus on low domestic ending stocks, Nelson added.

 

A technical analyst said serious near-term chart damage has been inflicted after the big sell-off late last week. Technical odds have significantly increased that at least a near-term market top is in place.

 

The next upside price objective for July soybeans is to push and close prices above solid technical resistance at US$14.69 1/2 a bushel, which would fill on the upside a big downside price gap on the daily bar chart. The next downside price objective is pushing and closing prices below solid support at Monday's low of US$13.71. First resistance for July soybeans is seen at Monday's high of US$14.25 and then at US$14.36. First support is seen at US$14.00 and then at US$13.75.

 

In deliveries, March soybean deliveries totaled 937 lots. Customer accounts at Man Professional Clearing issued and stopped 447 and 422 lots respectively. The last trade date assigned was March 10.

 

March soymeal deliveries totaled 666 lots. A customer account at JP Morgan issued 523 lots and a customer at Man Professional Clearing stopped 376 lots. The last trade date assigned was March 10.

 

March soyoil deliveries totaled 1,014 lots. Issuers and stoppers were scattered among various commission houses. The last trade date assigned was March 10.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled higher Tuesday on expectations of continued high inflation. The benchmark January 2009 soybean contract settled RMB101 higher at RMB4,563 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended sharply higher Tuesday on fresh buying tracking partial recovery in soyoil prices, strong Malaysian palm oil exports and estimates of lower output, trade participants said. The benchmark May contract on Bursa Malaysia Derivatives ended MYR173 higher at MYR3,838 a metric tonne.