July 17, 2007

 

CBOT Soy Outlook on Tuesday: Down 5-7 cents; follow-through sales, weather eyed

 

 

Soybean futures at the Chicago Board of Trade are seen starting Tuesday's day session lower on follow through selling from Monday's limit down price move, with weather maps watched closely for future direction.

 

CBOT soybean futures are called to start the session 5 to 7 cents lower.

 

In overnight e-CBOT trading, August soybeans were 7 1/4 cents lower at US$8.64 1/2 per bushel, and November was 7 1/2 cents lower at US$8.91 1/4.

 

Leftover selling from Monday's price correction will direct prices in early action, with milder temperatures and rain moving through the Midwest serving as the catalysts to entice traders to trim length in the market, analysts said.

 

However, some analysts anticipate the market will find price support to limit declines, as declining crop condition ratings and the uncertainty of a long growing season with soybean's critical growth period still ahead will provide strength, analysts added.

 

The impact of growing conditions in the next six weeks will have a greater impact on prices than mid July crop ratings and with long range forecasts still pointing to warmer and drier conditions through August, traders will not be to aggressive to extract to much premium from prices at this point, a market analyst said.

 

A technical analyst said November soybean prices Monday gapped lower on the daily bar chart and some chart damage occurred, but not yet serious. Strong follow-through selling on Tuesday would produce some serious near-term chart damage. Remember that soybeans have not seen a decent downside correction since mid-June, and a correction was due. The next upside price objective is closing prices above solid technical resistance at US$9.31 1/2, which would fill on the upside Monday's downside price gap on the daily bar chart. The next downside price objective is closing prices below solid support at US$8.75.

 

First resistance for November soybeans is seen at US$9.00 and then at US$9.07. First support is seen at US$8.90 and then at US$8.80.

 

U.S. Department of Agriculture in its crop progress report Monday said U.S. soybeans in good-to-excellent condition declined by 3 percentage points to 62% from last week's 65%. Analysts had predicted a condition ratings decline of 1-to-3 percentage points.

 

Dry, hot weather conditions in the Midwest brought declines in good-to-excellent crop conditions in Indiana and Iowa by five and seven percentage points, respectively, while Illinois remained flat with 76% of the crop in good-to-excellent condition. Iowa's top rated crops dropped 7 percentage points to 65%, and Minnesota's top rated crops dropped 12 percentage points to 53% good-to-excellent.

 

Sixty percent of the crop was reported blooming, up from 40% last week, 58% last year and 48% for the five-year average. Fourteen percent of the crop is setting pods, on par with last year at this time, but above the five-year average of 11%.

 

The DTN Meteorlogix Weather Service forecast said northeast and east-central Iowa will likely have additional thunderstorm activity Tuesday and possibly again Wednesday. The balance of the region should see only a few light showers during this time. There is a chance for showers or thundershowers Thursday for eastern Nebraska, southwest Iowa and northern Missouri. The balance of the region will be drier during that time. Rainfall during the 72 hour period should average 0.25-1.00 inch and locally heavier in eastern and southern Iowa and northern Missouri, 0.10-0.50 inch and locally heavier elsewhere in the region. Temperatures should be 88 to 97 Fahrenheit Tuesday and Wednesday, with temperatures ranging from 83-89F Thursday.

 

In the eastern Midwest, episodes of scattered showers and thunderstorms will slowly spread southward Tuesday through Thursday. Rainfall potential for this period is 0.30-1.50 inches and locally heavier with good coverage. Temperatures will average above normal through western and southern areas Tuesday and Wednesday, near to below normal northeast areas. Temperatures will average near to below normal Thursday.

 

Meanwhile, the Meteorlogix 6-10 day forecast for the Midwest calls for temperatures to average near to above normal west, and near to below normal east. Rainfall should be near to below normal in western belt, and near to above normal east.

 

In overseas markets, crude palm-oil futures on the Bursa Malaysia Derivatives ended lower after a choppy trading day Tuesday, taking their cue from a weak soy market. The benchmark October contract ended at MYR2,517 a metric tonne, down MYR23 from Monday.

 

Soybean futures traded on the Dalian Commodity Exchange settled lower Tuesday, tracking sharp losses in CBOT soybean futures Monday. The benchmark January 2008 soybean contract settled RMB37 lower at RMB3,314/tonne.