August 23, 2006

 

CBOT Soy Outlook on Wednesday: Steady-weak after softer overnight trade

 

 

Soy complex futures at the Chicago Board of Trade are expected to trade steady to slightly firmer on Wednesday, finding modest support from a late short covering rally in soybeans and gains in soyoil.

 

Light overnight strength could underpin trade, too.

 

Most-active November soybeans are called to open steady to 2 cents firmer. In e-cbot trade, November soybeans finished the overnight session 1 1/2 cents higher at US$5.63 3/4 bushel. Soymeal was up 60 cents at US$161.70 a short tonne while soyoil rose 5 points to 26.11 a pound.

 

Analysts and traders expect another quiet session as news is light. Given the absence of news, traders are likely to watch for developments from a crop tour being conducted in parts of the Midwest this week.

 

"There's really just been no news for this market and even out of the crop tour there hasn't been much market-moving news, except that everything seems to be ok," said John Kleist, of Kleist Agriculture Consulting.

 

Crop scouts on day two of the John Deere/Pro Farmer U.S. Midwest Crop tour said the average soybean pod count in Nebraska in a three-foot by three-foot square collected from 172 samples was 1,211.3, which was above the 1,143.48 pod count in 2005 and the three-year average of 1,163.66. In August, the USDA estimated Nebraska soybean production at 45.0 bushels per acre, over five bushels per acre less than in 2005. The U.S. Midwest crop tour does not estimate soybean yields.

 

Western leg tour scouts are looking ahead to sampling the corn and soybean crops in western Iowa Wednesday, as the tour moves north and east from Nebraska City, Neb. to Worthington, Minn.

 

Indiana's soybean yields were deemed disappointing by crop scouts on the tour's eastern leg.

 

Group evaluations of Indiana soybean fields found an average of 1316.44 plant pods per square yard. That figure represents a decrease of 6% from pod levels discovered during the 2005 event, and contradicts USDA forecasts published just days ago, which predicted steady soybean yields in the state this season.

 

The eastern leg of the crop tour will proceed westward Wednesday, reconvening in Iowa City, Iowa, with production estimates for the Illinois harvest.

 

Tuesday's gains were deemed "tepid short covering in a bear market" one analyst said. He noted bears are still in technical command, with their downside price objective being US$5.50, basis the November contract. To reverse the trend, bulls need a close above US$5.75. First resistance for November soybeans is seen at US$5.65 and then at US$5.70. First support is seen at US$5.59 1/2 and then at US$5.55.

 

In weather news, DTN Meteorologix said the two main weather models, the US and European, agree on the weather outlook for the next five days, but are only in fair agreement during days 6-10. Longer-term, both models have higher than normal heights for the upper Midwest and the Manitoba/Ontario region of Canada which they say is an above normal temperatures pattern for much of the USA. Rainfall is a harder call as there may be thunderstorms over top to the ridge and to east of any troughs in the lower Miss and Tennessee river valleys.

 

Over the next few days, scattered thunderstorms redevelop through the Midwest during Friday into Saturday and rainfall will favor filling crops. Warm temperatures continue to advance development of these crops.

 

For the Delta, temperatures remain not as hot and with some chance for a few thunderstorms during the next few days.

 

In other news, Rotterdam soymeal prices are weaker, while and soybean prices were mixed with a firm tone. European vegoils were mixed. Crude palm oil futures on the Bursa Malaysia Derivatives rose on gains in CBOT soyoil futures and lingering optimism about biodiesel demand. The benchmark November contract ended at MYR1,615 a metric tonne, up MYR17.

 

Soybean futures traded on China's Dalian Commodity Exchange slipped. The most-active January 2007 contract settled RMB1 lower at RMB2,555 a metric tonne.

 

India's summer-sown, or kharif, oilseeds output is likely to decline by 800,000-to-1.0 million metric tonnes on year due to a smaller area covered under the crop in 2006. According to industry estimates, India's kharif oilseeds output reached 13.35 million tonnes in 2005.

 

"Some people want to buy up soybeans due to concerns about long-term production, now with India expected to be down and Brazil likely to reduce acreage," Kleist said. "But we have to take care of the near-term (bearish) considerations first."