June 9, 2006

 

CBOT Soy Outlook on Friday: Steady up; following neutral USDA report

 

 

Soybean futures on the Chicago Board of Trade are seen starting Friday's session steady to firm, in sympathy with grain futures as firm outside markets and uncertain weather outlooks provide support following a neutral U.S. Department of Agriculture report.

 

Soybeans are called to open steady to 2 cents higher.

 

The absence of any surprises in the USDA's report will put the market's focus on weather once again, with the strength in outside markets and technical factors expected to be key determinants of price direction, said a CBOT commission house broker.

 

The European and U.S. weather models are conflicting on mid-range forecasts and that uncertainty should provide support heading into the weekend, analysts add.

 

Nevertheless, despite USDA ending stocks coming in as expected, the market still has to deal with have to eventually deal with increases to already record projected carryout projections, traders said.

 

Meanwhile, technical analysts say July futures closed near the session low Thursday as upside momentum is fading after big gains last Friday. The next upside price objective is closing prices above this week's high of US$6.11. A close back below technical support at US$5.80 would provide better downside technical momentum.

 

First resistance for July soybeans is seen at US$5.90 and then at US$5.93 1/2 - Thursday's high. First support is seen at US$5.86 - Thursday's low - and then at US$5.80.

 

USDA estimated 2006-07 ending stocks at 655 million bushels. This compares to the average trade estimate of 658 million bushels for 2006-07 soybeans. The November contract and beyond represent the new-crop and this news will particularly impact those contracts.

 

For old-crop, USDA said its estimate of 2005-06 ending stocks was 570 million bushels versus an average trade estimate of 568 million bushels.

 

In world numbers, USDA cut Brazil's soybean output figure to 55.7 million metric tonnes, compared to last month's estimate of 56.5 million tonnes. Argentine production was unchanged at 40.5 million metric tonnes.

 

The DTN Meteorlogix Weather Service forecast said scattered showers and thunderstorms will favor northern areas of the western Midwest Friday and the southern areas during Saturday and Saturday night. Drier conditions will prevail Sunday. Rainfall during this period should average 0.25-1.00 inch and locally heavier. Temperatures will average below normal in the north and above normal in the south Friday, and below normal during the weekend.

 

In the eastern Midwest, there is a chance for mostly light showers in northwestern areas of the region Friday, but dry conditions will be common elsewhere in the region. Scattered showers and possible thundershowers are on tap for Saturday into Sunday. Temperatures will average below normal north and above normal south Friday, and below normal during the weekend, Meteorlogix said.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Friday, cash dealers said. Spot cash soybean bids were down 1/2-cent in Peoria, Ill., and up 4-cent in St Louis, Mo., according to cash sources Friday.

 

Rotterdam soybeans and soymeal prices were lower. European vegoils were mixed.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Friday, on weaker Chicago Board of Trade soybean futures overnight and pressure from other local commodities futures. The benchmark September 2006 soybean contract fell RMB29 to settle at RMB2,622 a metric tonne, after trading between RMB2,615/tonne and RMB2,630/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended slightly lower, amid higher stocks and a rise in the ringgit versus the dollar.