August 22, 2007

 

CBOT Soy Outlook on Wednesday: Up 4-6 cents; e-CBOT, crop worries to underpin

 

 

Chicago Board of Trade soybean futures are seen opening Wednesday's day session on firm footing, continuing the overnight theme as flooding concerns for crops in the northern Midwest underpin prices, analysts said.

 

CBOT soybean futures are called to start the session 4 to 6 cents higher.

 

In overnight e-CBOT trading, September soybeans were 6 1/4 cents higher at US$8.22, and November soybeans were 7 cents higher at US$8.38.

 

Crop concerns continue to promote a supportive tone in the market, with heavy rains in the upper Midwest, and heat and dryness stress in the southern soybean belt serving as the catalysts for price strength, analysts said.

 

Analysts estimate 20% of the soybean belt is vulnerable to flooding, and another 25% continues to bake under extreme heat and dryness in the southern Midwest and Delta, said Arlan Suderman of Farm Progress Companies in a morning report.

 

Technical activity is seen as a potential feature, with traders watching how strong early gains will be amid the November contract's ability to filter into a chart gap and hold above its 100-day moving average Tuesday, a CBOT floor broker said.

 

A technical analyst said a bearish pennant pattern has formed on the daily November bar chart, but solid gains on Wednesday would negate that pattern and provide the bulls with some fresh upside technical momentum. The next downside price objective for November beans is closing prices below solid support at last week's low of US$8.04 1/2. The next upside price objective is pushing prices above solid technical resistance at US$8.51 1/2, which would fill on the upside last week's big downside price gap on the daily chart.

 

First resistance for November soybeans is seen at Tuesday's high of US$8.39 1/2 and then at US$8.45. First support is seen at Tuesday's low of US$8.29 and then at this week's low of US$8.19.

 

The DTN Meteorlogix Weather Service forecast said additional heavy storms may bring more flooding concerns to the western and northern Midwest during the next few days. Meanwhile, hot and dry weather continues over the southeast Midwest until a cold front arrives during the weekend. In the U.S. Delta, hot, dry weather continues to stress late filling soybeans for at least a few more days, Meteorlogix reports.

 

Crop scouts on the western leg of the John Deere/Pro Farmer U.S Midwest crop tour reported Nebraska's soybean pod counts were below the level seen in 2006. The tour estimated the average soybean pod count in a three-foot square area at 1,144, below the 1,211 pod count in 2006 and the three-year average of 1,169. Lower soybean pod counts were found in Indiana, as hot, dry weather cut into production potential, crop scouts on the eastern leg of the 2007 John Deere/Pro Farmer Midwest Crop Tour said Tuesday. The group found an average soybean count of 1,145 pods on Tuesday.

 

In other news, China said Wednesday that there are quality issues associated with imports of U.S. soybeans, and it has called for the U.S. to investigate the situation. Supplies from the U.S. were said to be often found to be contaminated with harmful weeds and soybean disease, while some don't match Chinese quality standards, said the General Administration of Quality Supervision, Inspection and Quarantine in a statement published on its Web site. The Administration also said a U.S. soybean shipment in February was contaminated with pesticide, which exposed domestic consumers to risk.

 

In overseas markets, most soybean futures traded on the Dalian Commodity Exchange settled slightly higher Wednesday, but analysts said the Chinese central bank's overnight interest rate hikes may help to slow the rise in futures prices of soft commodities. The benchmark May 2008 soybean contract settled RMB4 higher at RMB3,595 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended higher Wednesday, riding on physical sales to China and support from speculation over a likely increase in Indonesian export duties. The benchmark November contract on Bursa Malaysia Derivatives ended at MYR2,425/tonne.