July 31, 2006

CBOT Soy Outlook on Monday: Up 5-7 cents; e-CBOT, stressful central US heat

Chicago Board of Trade soybean futures are seen starting the trading week on firm footing, in tune with overnight price action, as extreme heat in the Midwest entices traders into adding risk premium, analysts say.

Soybeans are called to open 5 to 7 cents higher.

In e-CBOT trade, August soybeans were 7-cents higher at US$5.83 1/2, and November soybeans were 6 1/2-cents higher at US$6.04 1/2 per bushel.

Excessive weekend heat, with 6-10 day forecasts calling for near to above normal temperatures and near to below average precipitation is serving as the catalyst to extend Friday's upward price action, said a CBOT commission house broker.

Expectations of further crop rating declines is seen aiding the supportive tone, but analysts expect upside momentum will remain limited as outlooks for stressful central U.S. conditions to break by midweek and abundant soybean supplies keep fundamental pressure on prices.

Technical analysts said there is a very strong technical support zone located between US$5.85 and US$5.92 basis November futures. That support zone has produced solid price rebounds on three occasions since January. The next downside price objective for the contract is closing prices below solid support at the June low of US$5.91. It will take a close above solid technical resistance at this week's high of US$6.14 1/2 to provide some fresh upside technical momentum, analysts said.

First resistance for November soybeans is seen at US$6.00 and then at US$6.05. First support is seen at US$5.95 - Friday's low - and then at US$5.92 - last week's low.

The DTN Meteorlogix Weather Service forecast said Monday's US and European models are in fair agreement. A ridge of high pressure currently over the central US promoting hot, dry weather is expected to move off to the south and east during the next few days allowing for scattered showers and thunderstorms and cooler temperatures to develop in the Midwest states especially in some of the dry western areas. There are some hints especially on the US model that the ridging may try to build back towards the Midwest states from the southern and eastern states early next week, Meteorlogix's forecast said.

The 6-10 day outlook calls for near to above normal temperatures with near to below normal precipitation across the Midwest, Meteorlogix reported.

In deliveries, a total of 326 delivery notices were posted against the August soybean future. The house account at ABN Amro issued 190 of the receipts. The last trade date assigned was June 30. 735 delivery notices were posted against the August soymeal contract. The house account at ADM Investor Services issued all 735 lots, with stoppers scattered among various firms. The trade date assigned was June 30.

The Commodity Futures Trading Commission said Friday in its commitments of traders report that large speculative traders held net short futures and options positions totaling 14,751 lots in soybeans as of July 25, compared to the previous week's net shorts of 6,289 lots. In soyoil large specs held net long positions of 68,209 compared to 73,222 lots in the previous week. Large specs held net short positions of 25,170 in soymeal, up from net shorts of 23,275 lots reported in the previous week.

On tap for Monday, USDA is scheduled to release its weekly export inspections report 10:00 a.m. CDT and its weekly crop progress report at 3:00 p.m. CDT, analysts anticipate a 1 to 2 percentage point drop in soybeans rated in good-to-excellent condition.

U.S. Midwest cash soybean basis bids are mostly unchanged Monday, cash dealers said. Spot cash soybean bids were up 3 cents in Sioux City IA, down 10 cents in Bloomington, Ill., and up 1-cent in St Louis MO, according to cash sources Monday.

Rotterdam soybeans and soymeal prices were higher. European vegoils were mostly higher.

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled higher Monday, following Friday's CBOT gains, analysts said. The benchmark September contract settled RMB32 higher at RMB2,402 a metric tonne, after trading between RMB2,372 and RMB2,425/tonne.

Crude palm oil futures on the Bursa Malaysia Derivatives ended sharply higher Monday as the market continued to ride on a wave of bullish sentiment, spurred partly by optimism about biodiesel demand. The benchmark October CPO contract ended at MYR1,641 a metric tonne, up MYR21 from Friday, after moving between MYR1,615/tonne and MYR1,644/tonne.