April 19, 2007

 

CBOT Soy Outlook on Thursday: Firmer start seen after overnight bounce

 

 

A firmer start is expected Thursday for soy complex futures at the Chicago Board of Trade following a bounce overnight on ideas the market is oversold, analysts said.

 

Most-active July is called to open 3 to 5 cents firmer.

 

In e-cbot trade, July soybeans rose 3 3/4 cents to US$7.36 a bushel.

 

Soybean futures have tumbled lately, and on Wednesday dropped to fresh 13-week lows for the July contract, adding to the downward trend the market has experienced.

 

"A seven-week-old downtrend line is in place on the daily bar chart. But my bias is that there is not much left on the downside in soybeans, and the market is now short-term oversold, technically," a technical analyst said.

 

It is possible that bears might want to fill a gap that stretches from US$7.04 1/2 to US$7.21 for the July contract, the top of that gap possibly offering psychological support, analysts said. Still, after making new swing lows for the move, soybeans could rebound for the near-term, said John Kleist of Top Third Ag Marketing.

 

The technical analyst said for soybean bulls to regain some upside technical momentum, they need to produce a close above solid chart resistance at US$7.50. The next downside price objective for the bears is a close below solid support at US$7.22. First resistance is seen at US$7.38 and then at US$7.40. First support is seen at US$7.29 and then at US$7.25.

 

Thursday's export sales data was considered neutral. The U.S. Department of Agriculture said in its weekly export sales report 283,500 metric tons of soybeans were sold, which is an improvement from the previous week's marketing-year low, but were 5% below the prior 4-week average.

 

The trade estimate was for 150,000 to 200,000 tonnes. The biggest buyer was Mexico at 122,000 tonnes. Soymeal sales totaled 103,900 tonnes and were 40% below the previous week and equal to the prior 4-week average. This figure was in line with trade expectations of 75,000 to 125,000 tonnes. Soyoil sales were 900 tonnes, slightly above the trade guess of zero to 500 tonnes.

 

Kleist said the export sales data are likely to inspire much direction.

 

"Export sales have fallen apart with the South American (harvest online)," he said.

 

China, normally a top buyer, only purchased a small amount of U.S. soybeans.

 

"The big gun was noticeably absent from our shores," he said.

 

The Midwestern weather forecast is little changed from previous outlooks. DTN Meteorlogix said in the western corn belt, warming air temperatures will help soil temperatures warm during the next seven days. Showers during Sunday into Monday may lead to field work and planting delays.

 

In the east, because the next significant chance for rain does not come until next Wednesday or Thursday, conditions for field work and planting will improve until that time. The longer range forecast suggests early indications for rain, but that outlook is subject to change.

 

In other weather news, the National Oceanic and Atmospheric Administration said Thursday conditions known as La Nina may develop in coming months.

 

Agriculture meteorologists say the risk of Midwest drought and below-trendline yields is higher in years with this weather pattern.

 

However, NOAA said, it isn't yet clear that La Nina conditions will develop in the May-July period. La Nina refers to the unusual cooling of temperatures in the equatorial Pacific Ocean.

 

After losses this week, crude palm oil futures on the Bursa Malaysia Derivatives rallied as optimism about long-term demand and talk of strong export data helped the market shrug off heavy losses in CBOT soyoil futures. July ended at MYR2,231 a metric tonne, up MYR71. This could lend light support to soyoil futures.

 

Soybean futures traded on the Dalian Commodity Exchange followed suit, settling mostly higher Thursday on a technical rebound. Soybean futures there fell for seven consecutive days on a large amount of imports and high level of stocks. Despite gains in other contract months, the benchmark September 2007 contract settled RMB4 lower at RMB3,060 a metric tonne.

 

Late Wednesday, Argentina's Agriculture Secretariat slightly trimmed its forecast for 2006-07 soybean production to 45.5 million tonnes, down from 45.6 million tonnes forecast last month. USDA forecasts soy production at 45.5 million tonnes.

 

Rotterdam soybean and soymeal were mostly firmer and European vegoils were mixed.