April 24, 2006

 

CBOT Soy Outlook on Monday: Higher in technically inspired rally

 

 

Strength in overnight trade, higher soybean futures in China and the influence of outside markets attracting technical buying are expected to support soy complex futures at the Chicago Board of Trade Monday, analysts said.

 

Soybeans are called to open 4-6 cents a bushel higher.

 

In e-cbot trade, July soybeans were 6 1/4 cents higher at US$5.89 1/2 a bushel. July soymeal was up US$1.90 to US$173.90 a short tonne and July soyoil was up 6 points to 25.12 cents a pound.

 

"There's a lot of outside influences today (Monday)," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

 

Worries about escalating tensions between the U.S. and Iran in the dispute over Tehran's nuclear program and crude oil futures over US$75 a barrel in electronic trading Monday also could have a supportive effect on the CBOT soybean and grain markets. June crude oil futures look to open weaker and were last down 64 cents at US$74.53 a barrel, after reaching a US$75.35 overnight high.

 

Soybeans are expected to garner further support from a weaker U.S. dollar against the world's major currencies, Roose said.

 

"Bottom-line is we expect to see a technically inspired rally because of those factors," he said.

 

Traders exercised about 1,200 US$5.70 May soybean calls in Friday's trade, which was supportive for the overnight session and is also firming up early calls.

 

Meanwhile, the DTN Meterologix weather service said the eastern Midwest and Delta region should see rain, which favors crop development, but limits corn planting. In the northern Plains and western Midwest the cool, wet weather gives way to clearer skies, allowing for planting and other field work.

 

Scattered showers are expected to be seen in eastern areas Monday and Tuesday, however, with rain amounts ranging from 0.10-0.75 inch. Dry conditions will be seen across the Midwest Wednesday and Thursday, with mostly dry conditions Friday.

 

Mostly favorable conditions exist for early fieldwork, though conditions are becoming a bit too wet across northern areas, Meteorlogix said.

 

In Brazil, some disruptions to the end of harvest in Rio Grande do Sul are expected during the next five days. In Parana and Mato Grosso, generally favorable weather is expected.

 

Although July soybeans were higher in overnight electronic trade, Friday's lower close gives bears fresh downside technical momentum to start this week, a technical analyst said. Bulls will need a close last week's high of US$5.91 1/2 to get fresh upside technical momentum. A close below the April low of US$5.68 1/4 would provide bears with solid downside technical momentum. First resistance comes in at US$5.87 1/2, Friday's high, US$5.91 1/2, last week's high, and then at US$5.95. First support is seen at US$5.80, last week's low, and US$5.75.

 

In overseas markets, crude palm oil futures on the Bursa Malaysia Derivatives rose sharply, tracking a recent rally in the soyoil and crude oil markets. July rose MYR23 to MYR1,494 a metric tonne.

 

High energy prices are favorable for edible oils like palm oil, as it makes biodiesel more attractive as an alternative fuel source.

 

Dalian Commodity Exchange soybean futures rose on increased buying from poultry breeders ahead of next week's long market holiday, said traders there. The September contract rose RMB21 to settle at RMB2,601 a metric tonne.

 

Rotterdam soybean prices were mostly weaker while soymeal prices were firmer. European vegoils are mostly firmer.