June 29, 2007

 

CBOT Soy Outlook on Friday: Sharply higher on bullish USDA acres data

 

 

Chicago Board of Trade soybean futures are seen starting Friday's day session sharply higher, buoyed by a bullishly perceived acreage estimate from the U.S. Department of Agriculture.

 

CBOT soybean futures are called to start the session 25 to 50 cents higher.

 

The USDA acreage estimate is simply bullish, coming in well below trade estimates, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

Soybeans will be the driver of the market, with this lower-than-expected acres figure the focal point, a trader said. Longer range outlooks for tightening supplies and the need to rally prices to levels that will entice South American producers to increase their plantings to make up for US acreage declines will be magnified even greater now, he added.

 

End user and speculative buying should be featured as the market embraces the prospects of a draw down in inventories with any weather threats heading toward August expected to entice traders to significantly add risk premium to prices, analysts said.

 

USDA reported 2007 soybean acreage at 64.081 million acres, down 15% from 2006's record high. The acreage figure is the lowest planted area since 1995, with Illinois and Indiana showing the largest decrease in acreage from last year, down 1.75 million and 1.35 million respectively.

 

The acres data is also down 3.059 million acres from the March intentions estimate of 67.140 million, as well as below the average survey estimate of 67.838 million. The figure was also below the low end of trade estimates at 66 million acres.

 

Meanwhile, June 1 stocks in all positions were reported at a record 1.09 billion bushels, up 10% from June 1 2006. Indicated disappearance during the March-May period was 696 million bushels, up 3% from last year.

 

A market technician said no serious chart damage has occurred from the recent sell-off, but there is the specter of a bear flag or pennant forming on the daily bar chart. The next upside price objective for November soybeans is closing prices above solid technical resistance at US$8.47 1/2, which would fill on the upside last week's downside price gap on the daily bar chart. The next downside price objective is closing prices below solid support at last week's low of US$8.25.

 

First resistance for November soybeans is seen at US$8.47 1/2 and then at US$8.50. First support is seen at Thursday's low of US$8.35 1/4 and then at US$8.30.

 

The DTN Meteorlogix Weather Service forecast said hot weather early next week in the western Midwest is not expected to last long enough to significantly impact crops. However, the drying trend may continue for the central Minnesota region. In the eastern Midwest, showers Thursday occurred north of where they were expected to be in Ohio only. Recent shower activity has helped improve conditions but more rain will still be needed. The next chance for scattered thundershowers appears to be next Tuesday night or Wednesday. Only limited hot weather is seen ahead of this chance, Meteorlogix reports.

 

In overseas markets, crude palm oil futures on the Bursa Malaysia Derivatives ended higher Friday, boosted by strong gains in soyoil futures and expectations of a recovery in exports in the coming weeks. The benchmark September contract settled at MYR2,427 a metric tonne, up MYR44 from Thursday.

 

On Singapore's Joint Asian Derivatives Exchange, CPO futures were higher, with September up US$10.75 at US$700.25/tonne.

 

Cash soybean prices in China's major producing regions were lower in the week ended Friday on tumbling soybean futures prices at CBOT.

 

Soybean futures traded on the Dalian Commodity Exchange settled higher Friday on a technical rebound but may resume their fall after consolidation. The benchmark January 2008 soybean contract settled RMB17 higher at RMB3,229 a metric tonne.