May 24, 2006

 

CBOT Soy Outlook on Wednesday: Beans up 1 cent on e-CBOT, acreage estimate

 

 

Soybean futures on the Chicago Board of Trade are expected to open 1 cent higher Wednesday on an estimate for reduced U.S. soybean acreage and a firmer overnight trade, sources said.

 

However, conflicting signals of weak outside markets and developments in the global bird flu situation are seen as limiting factors.

 

On the e-CBOT platform, most-active July soybeans rose 1 1/4 cents to US$5.88 a bushel.

 

On Tuesday, July soybeans added 4 1/4 cents to US$5.86 3/4 as prices bounced from recent losses on speculative buying, soyoil strength and oversold conditions.

 

Informa Economics reportedly pegged soybean acres at 75.3 million, down 1.6 million from the U.S Department of Agriculture's most recent estimate. While most market participants expected a lower number, this is a bit below most trade guesses, said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

 

Traders will once again be watching the outside markets for trading direction. In early action, the metals complex is sharply lower and July crude oil is down 88 cents a barrel in electronic trade. The Reuters/Jefferies Commodity Research Bureau Index is down 3.40 to 348.97.

 

The global bird flu situation is another potential limiting factor for the market, said Roose.

 

Officials at the World Health Organization said they are "stumped" as to the source of infection that killed six out of seven members of an Indonesian family, though they said the case is the most important development in the spread of the virus since 2003. The size of the cluster and the confusion surrounding the source of the infection are troubling.

 

However, one official said the case is a limited transmission between members of the same family, and the deadly H5N1 virus has not mutated into a form easily passed among humans.

 

From an agricultural standpoint, market participants worry what the spread of the virus will do to soymeal demand, since it is a key ingredient for livestock feed.

 

"The fear is that more poultry gets slaughtered and they consume less meal. But the other thing is if you slow down the transmission do you slow down the movement of products, or exports, from one country to another? And if you slow down the movement of people from area to area, and does that mean you slow down the economy? That's the risk," Roose said. "I think (the Indonesia situation) it's one of those cautionary things but not a panic situation."

 

In the western Midwest, eastern Nebraska and western Iowa saw scattered thunderstorms in the past 24 hours, with rain amounts of 0.30-1.00 inch and locally heavier, the DTN Meteorlogix weather service said. The rest of the area saw rains of 0.30-0.50 inch. High temperatures ranged from the high 80s Fahrenheit to the low 90s.

 

Scattered showers and possible thundershowers are forecast Wednesday, with 0.10-0.75 inch of rain. On Thursday, mostly dry conditions are seen with a chance for light showers, and mostly dry conditions are seen on Friday.

 

In the eastern Midwest, mostly dry conditions were seen in the last 24 hours. But scattered showers and thundershowers, with 0.25-1.00 inch of rain, are expected Wednesday into Thursday. Conditions are expected to clear on Friday.

 

Soybean futures on China's Dalian Commodity Exchange rose on the higher CBOT prices. The benchmark September contract settled RMB21 higher at RMB2,662 a tonne. Soymeal and soyoil futures rose in tandem with soybeans.

 

Premiums for soybeans delivered to Asia are expected to fall in the week ahead, as U.S. planting conditions remain favorable. With Beijing's domestic stocks hovering around 3 million metric tonnes, any immediate increase in imports is unlikely, an analyst said. China is currently sourcing most of its soybeans from South America.

 

In export news, Taiwan bought 12,000 tonnes of U.S. soybeans for arrival in Taiwan June 11-25, in a tender concluded Wednesday. It also bought 23,000 tonnes of U.S. corn.

 

Soybean production in Brazil's Parana state is expected to be 9.3 million tonnes this year, down 20.6% from previous state estimates in March because of dry weather an a reduction in pesticide and fungicide application, a report from the Parana Secretary of Agriculture said.

 

A cash crunch is expected to reduce Brazil's grain and soy planted area for the 2006-07 crop by 5%-8% nationally, an analyst said.

 

 

SOY PRODUCTS

 

Soy product markets are expected to open mixed following the overnight trend and the firmer calls for soybeans.

 

July soymeal was up 70 cents to US$172.50 a tonne overnight, while July oil was down 11 points to 25.32 cents a pound.

 

Crude palm oil futures on the Bursa Malaysia Derivatives exchange closed modestly lower on concerns over weak demand. The benchmark August contract settled at MYR1,438 a tonne, down MYR3 from Tuesday.

 

A report on palm oil exports is due out Thursday. Analysts expect the report to show May 1-25 exports around 831,000 tonnes, well below the 1 million tonnes seen in the corresponding April period.