September 12, 2006

  

CBOT Soy Outlook on Tuesday: Seen mixed following USDA report

 

 

Soybean futures at the Chicago Board of Trade seen starting Tuesday's day session mixed, as traders and analysts debate the impact of the U.S. Department of Agricultures crop report.

 

The report is seen mixed as the lack of a surprise in the production estimate is seen keeping attention on a bearish downtrend, while a lower than expected ending stocks estimate provides demand support for prices, analysts said.

 

Don Roose, president U.S. Commodities in West Des Moines Iowa, sees soybeans opening on the defensive, emerging as a follower of weakness in corn and wheat as the production number failed to surprise the market.

 

Meanwhile, Mike Zuzolo of Risk management Commodities Inc. in Lafayette, Ind. projects a higher start, based on ending stocks coming in less than the trade was expecting. The demand profile could provide a boost to ignite short covering, he added.

 

Nevertheless, the trade remains entrenched in a bearish cycle as ample world and domestic stocks and the allure of challenging support at contract lows remains a short term target for the market, a CBOT commission house broker said.

 

The USDA pegged 2006-07 soybean production at 3.093 billion bushels on target with the average of trade estimates, and up 165 million from August. Soybean yield is projected at 41.8 bushels per acre, up 2.2 bushels from the August projection of 39.6 bushels an acre and on par with the average of trade estimates at 41.9. 2006-07 U.S. ending stocks are estimated at 530 million bushels, below the average of trade estimates at 566 million. 2005-06 ending stocks were trimmed to 485 million bushels from August's estimate of 515 million.

 

USDA said the higher production estimate if realized would be the second highest on record and was attributed to improved crop conditions due to near or above normal moisture in August across the Midwest crop belt.

 

A technical analyst said the market still has a solid near-term bearish technical advantage. The next downside price objective for November soybeans is technical support at US$5.25. It will take a close above technical resistance at US$5.70 to begin to provide some fresh upside technical momentum.

 

First resistance for November soybeans is seen at US$5.47 - Monday's high - and then at US$5.50. First support is seen at US$5.42--the contract low - and then at US$5.40.

 

USDA reported Monday 60% of the U.S. soybean crop was rated in good-to-excellent condition as of Sept. 10, up one percentage point from a week ago and in line with the unchanged to the one-percentage-point increase expected by analysts. In Illinois, 75% of the crop was reported in good-to-excellent condition, above last week's 74% percent. Iowa's soybean ratings increased to 74% in the good-to-excellent category from 71% last week, and in Minnesota, 58% of the crop was in good-to-excellent condition, down one percentage point from the previous week.

 

The USDA reported 27% of the crop is dropping leaves, compared to 13% last week and in line with the five-year average of 27%.

 

In deliveries, a total of 1,097 delivery notices were posted against the September soybean future. Issuers and stoppers were scattered among various commission houses. The last trade date assigned was Sept. 11. 253 delivery notices recirculated against September soyoil. The last date trade assigned was Sept. 11. In soymeal, 81 delivery notices were posted against the September contract. The last trade date assigned was Sept. 7.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Tuesday, pressured by overnight losses on the Chicago Board of Trade, an analyst said. The most active January 2007 contract settled RMB13 lower at RMB2,543 a metric tonne, after trading between RMB2,535/tonne and RMB2,553/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives exchange were little changed after choppy trade Tuesday as upbeat comments from an influential analyst helped offset the impact of bearish supply and demand data. The benchmark November CPO contract ended at MYR1,538 a metric tonne, down MYR1.