June 6, 2006

 

CBOT Soy Outlook on Tuesday: Down 1-2 cents on crop conditions, outside markets

 

 

Chicago Board of Trade soybean futures are seen starting Tuesday's session on the defensive, as pre-opening indicators point lower amid weakness in outside markets, favorable weather conditions and solid crop ratings.

 

Soybeans are called to open 1 to 2 cents lower.

 

In overnight electronic trade, July soybeans were 1 cent lower at US$6.02 1/4, July soymeal was US$0.80 lower at US$183.10 and July soyoil was 5 points lower at 25.25 cents per pound.

 

The market is poised for a lower start, as favorable weather conditions, crop ratings showing the 2006 growing season is off to an excellent start, and a lower tone in precious metals and crude oil futures are setting the stage for a lower opening, said a CBOT commission house broker.

 

However, traders are expected to keep a close eye on speculative activity, with technicals turning positive in recent sessions. The rolling of July positions is also expected to remain a feature, with trade positioning ahead of Friday's supply and demand reports expected.

 

Technical analysts say there are now technical clues that at least a near-term low is in place in July futures. The next key upside price objective for the market is closing prices above Monday's high of US$6.11 basis July. Multiple closes back below major psychological support at US$6.00 would again deflate upside momentum.

 

First resistance for July soybeans is seen at US$6.08 and then at US$6.11--Monday's high. First support is seen at US$6.00 and then at US$5.95.

 

The U.S. Department of Agriculture reported that 70% of the U.S. soybean crop was in good-to-excellent shape as of June 4, up from last year's 62% good-to-excellent rating.

 

The ratings show the crop is off to an excellent start, with no major problems seen across the nation, said Dax Wedemeyer, analyst with U.S. Commodities in West Des Moines, Iowa.

 

The USDA said 89% of the U.S. soybean crop had been planted, on par with last year's 89% seeded, but above the five-year average of 81%. Analysts had expected the USDA to report that 85%-90% of the crop was seeded. Seventy percent of the U.S. soy crop was emerged compared to 67% in 2005 and the five-year average of 58%.

 

The DTN Meteorlogix Weather Service forecast said a few thundershowers may linger over parts of the western corn belt Tuesday, before mainly dry conditions surface Wednesday and early Thursday. Scattered thundershowers may redevelop late Thursday. Temperatures will average near to above normal Tuesday, above normal Wednesday and Thursday. The high temperatures should be in the 80s and a few low 90s during this period.

 

In the eastern Midwest, scattered thunderstorms are on tap for Tuesday through early Wednesday. Rainfall potential is 0.25-1.00 inch but coverage may average less than 50%. Mainly dry conditions are expected during Thursday. Temperatures average near to above normal, during the three day period, Meteorlogix said.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Tuesday, cash dealers said. Spot cash soybean bids were down 4-cent in Peoria Ill, up 5 cents in central Ill, and down 1-cent in St Louis, MO, according to cash sources Tuesday.

 

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

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled slightly lower Tuesday, in line with moderate losses in Chicago Board of Trade soybean futures Monday. The benchmark September 2006 soybean contract settled RMB9 lower at RMB2,659 a metric tonne, after trading between RMB2,654/tonne and RMB2,668/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended mixed Tuesday after a range-bound, sluggish day, with a lack of fresh leads keeping most participants on the sidelines. The benchmark August CPO contract ended at MYR1,448 a metric tonne, up MYR1 from Monday, after moving between MYR1,444/tonne and MYR1,451/tonne.