July 12, 2006

 

CBOT Soy Outlook on Wednesday: Up 3-5 cents; USDA data, weather concerns

 

 

Soybean futures on the Chicago Board of Trade are expected to open higher, garnering strength from supportive U.S. Department of Agriculture data and lingering weather concerns.

 

Soybeans are called to open 3 to 5 cents higher.

 

The USDA's cut in its ending stocks projections was expected, but with the figures coming in near the low end of estimates and longer range weather forecasts still questionable, futures are poised to start on firm footing, analysts said.

 

The USDA data is a bit friendly, but after the initial reactions to report are over, weather will take precedence over the over the report, said a CBOT commission house broker.

 

USDA estimated 2006-07 ending stocks at 560 million bushels. This compares to the average trade estimate of 587 million bushels for 2006-07 soybeans. For old-crop, USDA said its estimate of 2005-06 ending stocks was 545 million bushels versus an average trade estimate of 560 million bushels.

 

Old crop ending stocks are down 25 million, with the crush raised 5 million to 1.720 billion bushels, reflecting stronger-than-expected soymeal export shipments and sales through June, USDA said. Exports were raised 5 million bushels and the residual was raised, reflective of the June 1 stocks report that indicated a higher residual for 2005-06, USDA added.

 

In world numbers, USDA trimmed its world 2006-07 ending stocks estimate to 53.01 million metric tonnes from June estimate of 57.52 million. USDA cut Brazil's 2005-06 marketing year soybean output figure to 55 million metric tonnes, compared to last month's estimate of 55.7 million tonnes. Argentine production was unchanged at 40.5 million metric tonnes.

 

Technical analysts said Tuesday's high of US$6.39 1/2 basis November futures is very strong overhead resistance for the market to overcome, and Tuesday's low-range close is a bit negative on a near-term technical basis. The next downside price objective for the November contract 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$6.39 1/2 and then at US$6.48 1/2 - the January high. First support is seen at US$6.28 1/2 - Tuesday's low - and then at US$6.23 1/2 - this week's low.

 

The DTN Meteorlogix Weather Service forecast said Wednesday's U.S. and European models are in fair to good agreement and a little different from Monday. Meterorlogix said it expects to see the western ridge build northward and shift eastward during the next few days and that it should linger over the eastern plains and western Midwest during the weekend before backing off to the southern plains early next week. Long-range charts suggest that this ridge may come back to the central plains and western Midwest late in the 10 day period, Meteorlogix said.

 

Hot and dry weather will cover the western Midwest from Friday through Sunday. Temperatures may back off a little early next week with the chance for a few showers or thundershowers, but it may turn hot again later next week. In the eastern Midwest, favorable growing conditions are on tap during the next few days as showers diminish and temperatures trend warmer. It may be hotter for a time this weekend and Monday but showers become possible again during the middle of next week and it should turn cooler again, Meteorlogix said.

 

In deliveries, a total of 961 delivery notices were redelivered against the July soybean future. The last trade date assigned was July 11. A total of 11 delivery notices were posted against July soyoil. The last trade date assigned was July 3.

 

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

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled higher Wednesday in step with overnight gains in Chicago Board of Trade soybean futures. The benchmark September contract rose RMB4 to settle at RMB2,529 a metric tonne, after trading between RMB2,519/tonne and RMB2,539/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended sharply lower Wednesday as the market succumbed to pressure from a recent buildup in stocks to a record high. The benchmark September contract ended at MYR1,491 a metric tonne, down MYR22 from Tuesday.