July 10, 2006

 

CBOT Soy Outlook on Monday: Up 2-4 cents; weather issues shape direction

 

 

Soybean futures on the Chicago Board of Trade are seen starting Monday's open-auction session on firm footing, extending the overnight theme, as weather concerns continue to underpin prices.

 

Soybeans are called to open 2 to 4 cents higher.

 

In overnight electronic trade, July soybeans were 3 cents higher at US$6.05, November soybeans were 3 cents higher at US$6.30 3/4, while December soymeal was US$0.10 lower at US$178.30 and December soyoil was 5 points higher at 28.16 cents per pound.

 

The market is poised to add in some weather premium, with longer-term weather forecasts pointing to warmer and drier conditions in the central U.S. serving as the catalyst for upside movement, analysts said.

 

Near-term conditions are favorable, with rain showers expected to move through the Midwest early this week, but how much rain moves in before expected heat returns is debatable, said a CBOT commission house broker.

 

However, weakness in outside markets and positioning ahead of Wednesday's crop report may limit upside momentum, he added.

 

Market technicians said November soybean futures would regain strong upside technical momentum by producing a close above solid resistance at last week's high of US$6.38 1/2. The next downside price objective for the market is filling an upside price gap on the daily bar chart-meaning pushing prices below US$6.12 1/2, basis November futures.

 

First resistance for November soybeans is seen at US$6.30 - Friday's high - and then at US$6.38 1/2. First support is seen at US$6.23 - Friday's low - and then at US$6.17 - last week's low.

 

The DTN Meteorlogix Weather Service forecast said Monday's U.S. and European models are in fair to good agreement. The upper level ridge that is now over the plains is expected to strengthen and shift toward the east.

 

It is expected to extend from the Rockies through the plains into the western Midwest from late this week or this coming weekend into next week. This means hotter temperatures will move into the Midwest and may last for awhile. The hottest region is likely to be over the drier areas of the western and northwest Midwest. Conditions will not be as hot to the east and south. There are signs that this ridge may want to again back off to the west and south beyond the 6-10 day period, but this is a long range outlook and therefore more uncertain, Meteorlogix said.

 

In deliveries, a total of 976 delivery notices were redelivered against the July soybean future. The last trade date assigned was July 7. A total of 52 delivery notices were posted against July soyoil. The primary stopper was the house account at ADM Investor Services with 33 lots. The last trade date assigned was June 29.

 

The Commodity Futures Trading Commission said Friday in its commitments of traders report that large speculative traders held net short futures and options positions totaling 6,339 lots in soybeans as of July 4, compared to the previous week's net shorts of 32,276 lots. In soyoil large specs held net long positions of 47,728 compared to 29,997 lots in the previous week. Large specs held net short positions of 14,932 in soymeal, down from net shorts of 19,601 lots reported in the previous week.

 

On tap for Monday, USDA is scheduled to release its weekly export inspections report 10 a.m. CDT and its weekly crop progress report at 3 p.m. CDT. Analysts anticipate soybean ratings for crops in good-to-excellent condition will decline by 2 to 3 percentage points.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Monday, cash dealers said. Spot cash soybean bids were up 1/2 cent in Keokuk, Iowa, up 6 cents in Peoria, Ill., and up 1 cent in St. Louis, according to cash sources Monday.

 

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

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled mostly lower Monday amid ample supplies. The benchmark September contract dropped RMB33 to settle at RMB2,544 a metric tonne, after trading between RMB2,522/tonne and RMB2,575/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives exchange ended slightly lower Monday, pressured by disappointing supply and demand data. The benchmark September CPO contract ended at MYR1,509 a metric tonne, down MYR3 from Friday.