July 21, 2009

 

CBOT Soy Outlook on Tuesday: Down 5-10 cents; good U.S. weather, crop

 

 

Soy complex futures at the Chicago Board of Trade are called to open lower Tuesday morning. Continued very good growing weather in the U.S. Corn Belt and generally good crop condition ratings are a heavy fundamental weight on the market at present, said an analyst.

 

Soybeans are called to open 5 to 10 cents a bushel lower, soybean meal down US$2.00 to US$3.00 a tonne and soybean oil futures are called to down 15 to 25 points a pound.

 

"Weather is going to be the main factor today," said Dax Wedemeyer, broker/analyst at U.S. Commodities in Des Moines. He said good growing weather will continue to cap any rally attempts in the soy complex futures. "Big crops get bigger," he added.

 

Scattered showers and thundershowers occurred in the U.S. Corn Belt the past 24 hours, with temperatures near to slightly below normal. More of the same is in the forecast for the region, with no crop-threatening weather on the horizon.

 

USDA reported Monday afternoon the condition of the U.S. soybean crop improved modestly over the last week, with 67% of the crop rated good or excellent compared to 66% in the top two categories last week. USDA reported 44% of the soybean crop was blooming as of Sunday. That's up 20 percentage points from last week, but behind the average pace of 62% on this date.

 

The key "outside markets" are in a bullish posture for the complex again Tuesday, as the value of the U.S. dollar is weaker against the other currencies, while crude oil and the U.S. stock indexes are higher.

 

In a research note released Monday, the University of Illinois' Darrel Good estimated the U.S. soybean yield at 44.7 bushels an acre, up from the USDA's July estimate of 42.6 bushels an acre. "The yield expectations based on current crop ratings or the assumption of favorable weather for the rest of the season are well above the long- term trend calculation for 2009 " he said in the note. "There is an extremely high correlation between the percent of the crop rated good or excellent at the end of the season and the U.S. average trend adjusted yield," he said. With high yields comes low prices, and Good said all factors point to "prospects of large supplies and further price weakness into harvest."

 

The specter of China soon auctioning some of its soybean stocks is also a negative fundamental in the market at present.

 

Technically, November soybean futures prices are in a five-week-old downtrend on the daily bar chart. The next upside price objective for the bean bulls is to push and close November prices above solid technical resistance at US$9.75 a bushel. The next downside price objective for the bears is pushing and closing prices below solid technical support at the July low of US$8.81 1/4 a bushel.

 

Soybean futures on the Dalian Commodity Exchange in China closed slightly lower Tuesday as the market consolidated. Demand was termed light amid little fresh market-moving news.