May 30, 2007

 

CBOT Soy Outlook on Wednesday: Down 2-4 cents, e-CBOT, outside Market weakness

 

 

Chicago Board of Trade soybean futures are seen starting Wednesday's day session lower, continuing the overnight theme, with favorable crop progress and weakness in outside vegoil markets expected to attract profit taking pressure.

 

CBOT soybean futures are called to start the session 2 to 4 cents lower.

 

In overnight e-CBOT trading, July soybeans were 2 1/2 cents lower at US$7.95 per bushel, and November was 2 1/4 cents lower at US$8.24 1/2.

 

The market is poised for a lower start, with pressure from sharply lower overnight prices in Malaysian palm oil futures expected to weigh on soyoil and soybeans, and ideas the market is overbought in the absence of fresh supportive news enticing longs to trim some length, analysts said.

 

Soybean plantings are moving along at an above average pace and with weather forecasts pointing to scattered rains to move east across the U.S. crop belt by the weekend, the trade will continue to focus on technicals and weather forecasts, analysts added.

 

However, with a long growing season still ahead and every bushel counted on to maintain decent ending stocks in the face of strong global demand, downside potential remains limit, an analyst said. Nevertheless, without some fresh news to feed the bulls there is potential for a correction down to US$7.75 basis July futures, he added.

 

A market technician said no chart damage occurred from Tuesday's setback, but the bulls do not want to see strong follow-through selling on Wednesday, which could produce near-term chart damage. The next upside price objective for July soybeans is closing prices above solid technical resistance at last week's high of US$8.13. The next downside price objective is closing prices below solid support at US$7.85.

 

First resistance for July soybeans is seen at US$8.00 and then at US$8.05. First support is seen at US$7.95 and then at US$7.90.

 

U.S. Department of Agriculture on Tuesday reported 80% of the U.S. soybean crop was planted as of Sunday, above the 75% planted last year and the five-year average of 67%. Planting was 59% completed last week, and trade estimates called for 78% to 90% to be completed as of Sunday.

 

In Illinois, 91% of the crop has been planted, above the 73% seeded in 2006 and the five-year average of 66%, the USDA said. In Iowa, 87% of the crop was planted, compared to 91% last year and the five-year average of 84%. The plantings data did not produce any surprises, but the report is slightly negative for prices, said U.S. Commodities Don Roose.

 

Nationally, 48% of the soybean crop has emerged, compared to 38% last year and the five-year average of 35%.

 

The DTN Meteorlogix Weather Service forecast said rain and thunderstorms will continue to maintain favorable moisture conditions for emerging and developing crops in the western Midwest. In the eastern Midwest, weekend showers will help replenish soil moisture after the recent drier trend, but more is still needed. The outlook does see a chance for some shower activity during the weekend but with only mostly light amounts, Meteorlogix forecasts.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Wednesday, influenced by a sharp drop in the stock market. The fall in the futures came as the Shanghai Composite Index dropped 6.5% after the Ministry of Finance said it would raise its stamp duty on share trades to 0.3% from previous 0.1%, effective Wednesday. The new benchmark January 2008 soybean contract settled RMB59 lower at RMB3,285 a metric tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended lower Wednesday, with market sentiment hit by weakness in other related commodities, such as soyoil, and declines on regional stock markets. Traders said the market also succumbed to profit-taking as participants locked in gains from a recent rally to record high levels. The benchmark August contract ended down MYR38 at MYR2,500 a metric tonne.