July 24, 2007

 

CBOT Soy Outlook on Tuesday: Up 5-7 cents; consolidating after recent slide

 

 

Chicago Board of Trade soybean futures are expected to start Tuesday's day session higher, as the market attempts to consolidate from sharp declines in recent sessions, analysts said.

 

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

 

In overnight e-CBOT trading, August soybeans were 5 3/4 cents higher at US$8.22 per bushel, and November was 6 1/4 cents higher at US$8.47 1/4.

 

The market is poised for a higher start, as oversold technical conditions, lingering concerns over the vulnerability of crops in a long growing season and a decline in crop ratings, entice traders to add some risk premium back into prices, said Jason Roose, analyst with U.S. Commodities in West Des Moines, Iowa.

 

Spillover support from sharply higher opening calls for wheat futures, higher overnight price action in Malaysian palm oil futures is seen aiding the higher theme as well, analysts said.

 

Nevertheless, weather will remain a key driver of prices, with favorable near-term weather outlooks expected to keep a lid on upside movement, analysts added.

 

However, crop ratings surprised a few people, showing that recent rains in the Midwest may have been more of a crop saving rains than yield improving moisture in parts of the crop belt, Roose added.

 

A market technician said serious near-term chart damage has been inflicted in soybeans, including more Monday, to strongly suggest a major market top is in place. Price action Monday saw a bearish downside breakout from a bear flag on the daily bar chart. The next downside price objective for November soybeans is closing prices below solid support at the June low of US$8.25. The next upside price objective is closing prices above solid technical resistance at US$8.69 1/2, which would fill on the upside Monday's downside price gap on the daily bar chart.

 

First resistance for November soybeans is seen at US$8.50 and then at US$8.55 1/2. First support is seen at Monday's low of US$8.34 and then at US$8.28.

 

The DTN Meteorlogix Weather Service forecast said mostly dry conditions are on tap for the western Midwest in the next 48 hours. Episodes of scattered showers and thunderstorms are forecast for Thursday and Friday, with rainfall totals of 0.25-0.75 inch with locally heavier expected. Dry conditions or just a few lingering light showers are seen for the south on Saturday, with dry conditions on Sunday and Monday. Temperatures will average above normal with highs in the upper 80s to middle 90s Fahrenheit.

 

In the eastern Midwest, dry conditions or just a few light showers are forecast for the next 48 hours. Episodes of scattered showers and thunderstorms are expected Thursday through Saturday. Rainfall totals of 0.30-1.00 inch, with locally heavier amounts are expected. Dry conditions or just a few lingering light showers are seen for southern parts of the region Sunday, with dry conditions Monday. Temperatures will average near to below normal during the next 48 hours with highs in the low to middle 80s, near normal thereafter with highs of 85-90F.

 

U.S. Department of Agriculture in its crop progress report Monday said U.S. soybeans in good-to-excellent condition declined by 1 percentage point to 61% from last week's 62% despite beneficial rains in most of the corn belt last week, analysts said. Analysts had predicted a condition ratings increase of 1-to-2 percentage points.

 

The northwestern states of the Midwest declined in crop rating conditions because of continuing dry weather, said Dan Cekander analyst with Fimat Futures in Chicago.

 

Dry, hot weather conditions in the northwest Midwest brought declines in good-to-excellent crop conditions in Minnesota and South Dakota by five and twelve percentage points, respectively, while Illinois climbed 2 percentage points with 78% of the crop in good-to-excellent condition. Iowa's top rated crops improved 3 percentage points to 68%, and Indiana's top rated crops rose 5 percentage points to 45% good-to-excellent.

 

Seventy-five percent of the crop was reported blooming, up from 60% last week, 74% last year and 67% for the five-year average. Thirty percent of the crop is setting pods, on par with last year at this time, but above the five-year average of 24%.

 

In other news, the Indian government Monday lowered import tariffs on palm, soy and sunflower oils by 5-10 percentage points, in yet another bid to tame inflation. This is the fifth cut in import duty on edible oils in less than a year due to continuous rise in global prices. India is one of the world's largest importers of edible oils by volume and sources more than half of its edible oil requirements from abroad.

 

In overseas markets, crude palm oil futures on Malaysia's Derivatives Exchange ended higher Tuesday as a cut in Indian import duties and expectations of strong exports in the second half of July lifted market sentiment. The benchmark October CPO contract on Bursa Malaysia Derivatives ended at MYR2,525 a metric tonne, up MYR45 from Monday.

 

Soybean futures traded on the Dalian Commodity Exchange settled lower Tuesday, dragged down by sharp declines at the CBOT overnight. The benchmark January 2008 soybean contract settled RMB30 lower at RMB3,268 a metric tonne.