August 2, 2006

 

CBOT Soy Outlook on Wednesday: Up 3-4 cents; hot, dry 6-10 day, tech support

 

 

Chicago Board of Trade soybean futures are seen starting Wednesday's session higher, in step with overnight price action, buoyed by longer term dryness concerns and ideas downside movement is a bit overdone.

 

Soybeans are called to open 3 to 4 cents higher.

 

In e-CBOT trade, November soybeans were 3 3/4-cents higher at US$5.97 1/2 per bushel.

 

The market will take its cue from the overnight session, as traders remain cautious about pressing the market amid the potential for a return to hot, dry conditions next week with soybeans in the midst of its key pod filling stage, analysts said.

 

However, near-term weather in the Midwest is improving with a break from the heat and scattered rain showers on tap for the next couple of days, traders add. The battle of near-term and longer range forecasts may promote two-sided action, with technical support beneath the market and a reluctance of speculative sellers to aggressively press prices failing to break futures out of their recent trading range, said a CBOT commission house broker.

 

Technical analysts said prices are in the lower portion of a wide trading range that covers the past six months. There is a very strong technical support zone located between US$5.85 and US$5.92, basis November futures, with the next downside price target for the market is closing November below solid support at the June low of US$5.91. It will take a close above solid technical resistance at US$6.00 to begin to provide some fresh upside technical momentum, analysts said.

 

First resistance for November soybeans is seen at US$5.98 1/2 - Tuesday's high - and then at US$6.00. First support is seen at US$5.93 - Tuesday's low - and then at US$5.91.

 

The DTN Meteorlogix Weather Service forecast said Wednesday's U.S. and European models are in fair agreement. The center of the ridge of high pressure promoting recent hot, dry weather in the Midwest is heading for the east coast. This is allowing for some moisture to flow up the back side of the ridge into northwest portions of the Midwest corn-belt where some significant rainfall reported overnight. As this rainfall works its way eastward across the Midwest during the next 24-48 hours it will weaken as it runs into more high pressure to the east.

 

Significant rainfall and cooler temperatures in the western Midwest will ease stress to filling corn and soybeans in the near term. However, a return to above normal temperatures and below normal rainfall during the 6-10 day period will deplete soil moisture and increase crop stress once again, Meteorlogix forecasts. In the eastern Midwest, hot, dry weather is depleting soil moisture and increasing stress on filling corn and soybeans especially in the dry areas of western Illinois. Crop stress will ease on Thursday and Friday as scattered showers and cooler temperatures will develop, but rainfall will be limited with a return to above normal temperatures and below normal rainfall in the 6-10 day period, Meteorlogix added.

 

In deliveries, a total of 1,144 delivery notices recirculated against the August soybean future. The last trade date assigned was Aug. 1. 491 delivery notices recirculated against the August soymeal contract. The trade date assigned was July 28. The first delivery notices of the period were posted against the August soyoil future.

Delivery intentions totaled 867 lots, with the house account at ADM Investor Services issuing 783 of the receipts, and the house account at Bunge Chicago the principle stopper of 609 lots. The last trade date assigned was July 28.

 

Rotterdam soybeans and soymeal prices were mixed. European vegoils were mixed.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled mostly higher on an upward correction, an analyst said. The benchmark September contract settled RMB1 higher at RMB2,400 a metric tonne, after trading between RMB2,375 and RMB2,420/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended sharply lower Wednesday as the market succumbed to profit-taking a day after surging to a near 27-month high. The benchmark October CPO contract ended at MYR1,642 a metric tonne, down MYR31 from Tuesday after moving between MYR1,640 and MYR1,682/tonne.