June 18, 2007

 

CBOT Soy Outlook on Monday: Up 10-15 cents; adds premium on dryness issues

 

 

Chicago Board of Trade soybean futures are seen starting Monday's day session higher, expanding recent price strength to new highs as dryness issues remain an underpinning theme.

 

CBOT soybean futures are called to start the session 10 to 15 cents higher.

 

In overnight e-CBOT trading, July soybeans were 13 1/4 cents higher at US$8.60 1/2 per bushel, and November was 13 1/4 cents higher at US$8.96 1/4.

 

The market continues to show a need to add risk premium, as longer range forecasts point to hot, dry conditions in the eastern Midwest and a rain system moving through the belt is not adequate enough to offset the drying trend, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

The bottom line is the dry areas of the belt still need moisture, as drought conditions continue to expand, Roose added.

 

Meanwhile, the market continues to feed off its own technical strength with futures targeting new highs, analysts said. Overnight price strength in Malaysian palm oil and Chinese soybean futures are seen aiding the bullish a cause as well, analysts added.

 

Nevertheless, traders will keep a close eye on midday weather forecasts, as a change to a wetter forecast coupled with overbought conditions could trigger corrective price action, a CBOT floor trader said.

 

A technical analyst said the market bulls' march toward the next major psychological resistance level of US$9.00 a bushel continues, amid a weather market. The next upside price objective for July soybeans is closing prices above technical resistance at US$8.50. The next downside price objective is closing prices below solid support at US$8.22.

 

First resistance for July soybeans is seen at the contract high of US$8.48 and then at US$8.50. First support is seen at US$8.40 and then at Friday's low of US$8.33 1/2.

 

The DTN Meteorlogix Weather Service forecast said showers forecast for late Monday through early Tuesday for the eastern Midwest region appear mostly light and not enough to reverse the recent drying trend. This may continue to be a drier, warmer than normal weather pattern for the eastern Midwest.

 

The Commodity Futures Trading Commission on Friday reported in its supplemental commitment of traders report that index funds were reported to hold net long positions totaling 141,971 combined soybean futures and options contracts as of June 12, down from 143,635 the prior week.

 

Traditional large speculative traders were net long 115,280 contracts compared with net longs of 120,576 in the previous week. Commercials were reported to hold net short combined futures and options positions totaling 239,309 contracts, down from the previous week's 240,436 contracts.

 

On tap for Monday, the U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 11 a.m. EDT (1500 GMT) and weekly crop progress reports at 4:00 p.m. EDT.

 

In overseas markets, crude palm oil futures on the Bursa Malaysia Derivatives ended sharply higher Monday, boosted by a rally in soyoil futures and a hike in Indonesian export duties. The benchmark September contract ended at MYR2,457 a metric tonne, up MYR54 from Friday.

 

On Singapore's Joint Asian Derivatives Exchange, trading activity remained sluggish, with the volume totaling 16 lots.

 

Soybean futures traded on the Dalian Commodity Exchange settled higher Monday, supported by Friday's gains at CBOT. The benchmark January 2008 soybean contract settled RMB61 higher at RMB3,344 a metric tonne.