June 8, 2007

 

CBOT Soy Outlook on Friday: Down 6-8 cents, e-CBOT, pre-weekend profit-taking

 

 

Chicago Board of Trade soybean futures are expected to start Friday's day session on weak footing, taking its cue from overnight trade, with pre-weekend profit-taking seen as a featured attraction.

 

CBOT soybean futures are called to start the session 6 to 8 cents lower.

 

In overnight e-CBOT trading, July soybeans were 8 1/2 cents lower at US$8.23 1/2 per bushel, and November was 9 cents lower at US$8.55 1/2.

 

The market initially rallied to new highs overnight on fears of dry weather in the eastern Midwest, but sharply lower Malaysian palm oil futures and morning forecasts calling for better chances of rain in the eastern belt next week combined to attract speculative selling, said Don Roose, president of US Commodities in West Des Moines, Iowa.

 

Overbought market conditions in the face of record speculative net longs in the market is expected to encourage some pre-weekend profit taking ahead of Monday's supply and demand report as well, analysts said.

 

The market should focus on positioning ahead of Monday's report, with weakness in outside markets aiding the defensive theme, analysts added.

 

However, traders will remain respectful of the potential for changing weather forecasts for the Midwest and with bullish long range fundamental outlooks, downside pressure should remain limited, CBOT floor traders said.

 

Nevertheless, a 6.6% drop in the value of Malaysian palm oil futures overnight and selling pressure across commodities in general overnight should generate pressure, Roose added.

 

A technical analyst said the market still has solid upside momentum and is aiming for a bullish weekly high close on Friday. The next upside price objective for July soybeans is closing prices above solid technical resistance at US$8.50. The next downside price objective is closing prices below solid support at US$8.00.

 

First resistance for July soybeans is seen at today's contract high of US$8.33 and then at US$8.40. First support is seen at US$8.25 and then at Thursday's low of US$8.20 1/2.

 

The DTN Meteorlogix Weather Service forecast said showers and thunderstorms will maintain favorable moisture conditions for emerging and developing crops in the western US Midwest. In the eastern Midwest, hot, dry winds yesterday were somewhat stressful but it will turn cooler Friday. The overall drier trend continues during the next five days, despite a few showers in the region Friday. Showers may develop later next week, Meteorlogix reports.

 

The U.S. Department of Agriculture is scheduled to release its June supply and demand report Monday 8:30 a.m. EDT. The report isn't expected to cause much of a stir in the soybean futures market, as analysts anticipate only a minor tweak to old- and new-crop balance sheet line items.

 

The average of analysts' estimates peg U.S. 2006-07 U.S. soybean ending stocks at 598 million bushels, down 12 million from May's forecast. The estimates ranged from 580 million to 620 million bushels. The average of analysts' estimates for 2007-08 ending stocks was 328 million bushels from a range of 300 million to 530 million bushels.

 

In overseas markets, crude palm oil futures on the Bursa Malaysia Derivatives tumbled Friday as the market succumbed to heavy profit-taking pressure after having reached an all-time high earlier in the week. The benchmark August contract ended at MYR2,471 a metric tonne, down MYR174 from Thursday.

 

Cash soybean prices in China's major producing regions were higher in the week to Friday on rising prices of imported soybeans.