July 11, 2006

 

CBOT Soy Outlook on Tuesday: Up 8-10 cents on crop ratings, weekend heat

 

 

Chicago Board of Trade soybean futures are poised to start Tuesday's open auction session on firm footing, buoyed by a larger-than-expected drop in weekly crop ratings and hot temperatures moving into the Midwest.

 

Soybeans are called to open 8 to 10-cents higher.

 

In overnight electronic trade, July soybeans were 7-cents higher at US$6.10, November soybeans were 10 1/4-cents higher at US$6.40, while December soymeal was US$2.50 higher at US$181.40 and December soyoil was 20 points higher at 28.46 cents per pound.

 

The combination of the ratings drop and hot weekend temperatures will entice traders into adding risk premium, with speculative short covering and fund buying expected to aid the supportive tone, analysts said.

 

Near-term forecasts remain favorable to crop conditions, but with the potential for stressful heat in the driest areas of the western Midwest by the weekend possibly leading to further ratings declines next week, futures are poised to error on the side of higher prices, said a CBOT broker.

 

Nevertheless, some floor analysts say the market will encounter selling pressure on higher moves, as commercial hedging and reminders of how well hybrid seeds performed during dry conditions last year, will limit upside momentum after the initial gains.

 

Technical analysts said November futures would gain fresh 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.

 

First resistance for November soybeans is seen at US$6.32 and then at US$6.35 1/2--Monday's high. First support is seen at US$6.23 1/2--Monday's low-and then at US$6.20.

 

The DTN Meteorlogix Weather Service forecast said Tuesday's U.S. and European models are in fair to good agreement during the next 5 days. The southwest ridge is expected to build northward into the central Rockies and eastward into the central plains and the Atlantic ridge is expected to spread westward into the southeast USA.

 

Hotter and drier weather is expected to cover the western Midwest later this week through at least early next week. This will increase the risk to reproductive corn and developing soybeans, Meteorlogix forecasts. In the eastern Midwest rain and cool temperatures will favor any reproductive corn and developing soybeans during the next few days. It may be drier and hotter beyond that but it does not look to be as hot as the western belt will be, Meteorlogix added.

 

Meanwhile, soybean crop ratings dropped 6 percentage points in the good-to-excellent category. The U.S. Department of Agriculture reported that 58% of the U.S. soybean crop was in good-to-excellent shape as of July 9, down from last week's 64% good-to-excellent rating. Key soybean states showed sizable declines in their top rated categories. Iowa soybeans were rated 65% good-to-excellent, down 8 percentage points, Illinois 57%, down 8 percentage points, Minnesota 68%, down 7 percentage points, and Nebraska 50%, down 7 percentage points.

 

The USDA said 38% of the U.S. soybean crop was blooming, 10 percentage points above the five year average. Seven percent of the U.S. soy crop was setting pods compared to 5% in 2005 and the five-year average of 4%.

 

In deliveries, a total of 961 delivery notices were redelivered against the July soybean future. The last trade date assigned was July 10. A total of 19 delivery notices were posted against July soyoil. The key stopper was the house account at ADM Investor Services with 8 lots. The last trade date assigned was June 30. Twenty-seven delivery notices were posted against July soymeal, with the house account at ADM Investor Services stopping all 27 lots. The last date assigned was June 28.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Tuesday, with spot cash soybean bids reported down 7-cent in Frankfort, Ind., according to cash sources Tuesday.

 

Rotterdam soybeans and soymeal prices were mostly higher. European vegoils were steady to higher.

 

In news, the Kaohsiung branch of Taiwan's Breakfast Soybean Procurement Association, or BSPA, bought 60,000 metric tonnes of Brazil-origin soybeans for August delivery from trading house Cargill in a tender Tuesday, said a trader in Taipei.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Tuesday on weak fundamentals, despite gains in Chicago Board of Trade soybean futures Monday, analysts said. The benchmark September contract fell RMB19 to settle at RMB2,525 a metric tonne, after trading between RMB2,500 and RMB2,544/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended mixed Tuesday as the market weighed bearish factors such as record-high stocks against positive influences like gains in soyoil. The benchmark September contract ended at MYR1,513 a metric tonne, up MYR4 from Monday.