May 10, 2006

 

CBOT Soy Outlook on Wednesday: Seen up; following overnight theme

 

 

Soybean futures on the Chicago Board of Trade are seen starting Wednesday's session higher on follow through buying from solid gains reported in overnight electronic trade.

 

Analysts expect soybeans to open 4 to 6 cents per bushel higher.

 

In overnight electronic trade, July soybeans were 7 1/2 cents higher at $6.12, July soymeal was $2.00 higher at $181.20 and July soyoil was 12 points higher at 25.20 cents per pound.

 

The supportive impact of higher overnight prices, with traders leery of stepping in front of commodity fund buying or short covering continues to keep prices firmly underpinned, analysts say.

 

Bullish chart formations continue to provide technical support to prices, with talk of cool, wet near-term weather conditions in the Midwest slowing early emergence and potential disruptions in Brazil's exports are seen providing mild strength.

 

However, traders are said to be scratching their heads in response to the overnight gains, with domestic inventories projected at all-time highs and seasonal declines in exports providing little fundamental support for higher prices. Early declines in outside inflationary markets with metals and energy prices down are seen limiting upside momentum.

 

Meanwhile, technical analysts say Tuesday's price action left a mini island bottom reversal pattern on the daily bar chart, which is a technical clue that the downside is limited at present price levels. It will take a close above solid resistance at last week's high of $6.14 1/2 to provide fresh upside technical momentum. A close below support at $5.91 would provide fresh downside technical momentum.

 

First resistance for July soybeans is seen at $6.11 1/2 - Tuesday's high - and then at $6.14 1/2. First support is seen at $6.04 - Tuesday's low - and then at $6.01 1/2 - the bottom of Tuesday's price gap.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Wednesday, cash dealers said. Spot cash soybean bids were down 1 cent in Quincy, Ill., unchanged in St. Louis, Mo., and unchanged in Evansville, Ind., according to cash sources Wednesday.

 

The DTN Meteorlogix Weather Service forecast said the western Midwest will experience episodes of scattered light showers with some light rain or drizzle possible in the east and north over the next three days. Rainfall averages a trace to 0.50 inch with the heaviest in the east. Temperatures will average near to below normal Wednesday, below to much below normal Thursday and Friday.

 

In the eastern Midwest, there is a chance for rain, thunderstorms and strong winds during the next three days. The heaviest of this activity should occur Wednesday night and during Thursday but may continue in northern areas of the region Friday. Rainfall potential is 0.50-2.00 inches and locally heavier, coverage will be very high. Temperatures average near normal Wednesday, below or well below normal during Thursday and Friday, Meteorlogix said.

 

U.S. Department of Agriculture is scheduled to release its May supply and demand report Friday at 7:30 a.m. CDT (1230 GMT). The average of analysts' estimates projects 2005-06 ending stocks at 568 million bushels. The estimates ranged from 555 million to 585 million bushels. In April, USDA projected the 2005-06 carryout at 565 million bushels. The average of analysts' estimates projects 2006-07 ending stocks at 678 million bushels. The estimates ranged from 621 million to 729 million bushels.

 

In deliveries, a total of 979 delivery notices were posted against the CBOT May soybean contract. Issuers and stoppers were scattered among various commission houses. The last trade date assigned was May 9. A total of 661 delivery notices were posted against May soyoil. The house account at Bunge Chicago issued 379 lots, with the house accounts at Term Commodities and ADM Investor Services stopping 157 lots and 118 lots respectively. The last trade date assigned was May 9.

 

Rotterdam soybeans and soymeal prices were higher, and European vegoils were steady to lower.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled higher Wednesday, tracking gains in Chicago Board of Trade soybean futures Tuesday. The benchmark September 2006 soybean contract settled RMB10 higher at RMB2,670 a metric tonne, after trading between RMB2,663/tonne and RMB2,679/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended a tad lower Wednesday after a choppy trading day as pressures from a strengthening ringgit overshadowed a friendly supply and demand report. The benchmark July CPO contract ended at the day's low of MYR1,446 a metric tonne, down MYR4 from Tuesday.