July 21, 2006

CBOT Soy Outlook on Friday: Down 3-5 cents, e-CBOT, favorable weather

Soybean futures at the Chicago Board of Trade are seen starting Friday's session on the defensive, in step with e-CBOT trade, as the market continues to trade favorable near term weather conditions.

Soybeans are called to open 3 to 5 cents lower.

In e-CBOT trade, November soybeans were 5 cents lower at US$6.00 1/2 per bushel.

The absence of a near term weather threat, with the heat ridge in the Midwest breaking down and improved rain chances for most of the Midwest crop belt, futures are poised to start lower, analysts said.

Carryover pressure from technical sales in prior sessions is expected to aid the defensive tone, but with end of the week positioning, talk of overdone losses futures may experience choppy range bound action heading into the weekend, said a CBOT commission house broker.

The active November contract closed in on psychological support at the US$6.00 per bushel level overnight, and traders are expected to watch that price level closely, as the penetration of that support is seen uncovering pre-placed sell stop orders, traders added.

Market technicians said futures still have downside technical momentum, but the market is short-term oversold, technically, and due for at least a corrective bounce soon. This month's high of US$6.39 1/2 basis November soybeans is very strong overhead resistance to overcome, but this week's low of US$6.01 is now some strong technical support. It will take a close above technical resistance at US$6.25 to revive upside momentum.

First resistance for November soybeans is seen at US$6.10 3/4--Thursday's high--and then at US$6.14. First support is seen at US$6.01-this week's low--and then at US$5.95.

The DTN Meteorlogix Weather Service forecast said cooler temperatures in the western Midwest will help ease stress to reproductive corn and soybeans during the next few days, but very dry conditions still exist in some areas. The next chance for scattered showers in the driest areas looks to be next Tuesday night or Wednesday, Meteorlogix said. In the eastern Midwest, cooler temperatures will favor corn and soybeans during the next few days as well. Dryness is still of most concern over west-central Illinois, Meteorlogix said. Scattered thundershowers Friday and tonight will track mostly south of this area, but the balance of the eastern Midwest is doing and will continue to do better, Meteorlogix added.

U.S. Midwest cash soybean basis bids are mostly unchanged Friday, cash dealers said. Spot cash soybean bids were up 2 cents in Sioux City, IA., up 1-cent in Peoria, Ill., and down 3-cent in St. Louis, MO., according to cash sources Friday.

Rotterdam soybeans were lower and soymeal prices were flat to lower. European vegoils were mixed.

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Friday, following losses in metals on the Shanghai Futures Exchange. The benchmark September contract settled RMB14 lower at RMB2,461 a metric tonne, after trading between RMB2,450/tonne and RMB2,480/tonne.

Crude palm oil futures on the Bursa Malaysia Derivatives ended slightly lower Friday as profit-taking halted a market rally to two-year highs. The benchmark October CPO contract, which surged Thursday to its highest since June 2004, retreated Friday to end MYR11 lower at MYR1,580 a metric tonne.