September 12, 2007

 

CBOT Soy Outlook on Wednesday: Seen up on supportive USDA crop report

 

 

Chicago Board of Trade soybean futures are seen starting Wednesday's day session on firm footing, bolstered by supportive U.S. Department of Agriculture crop report data and bullish technical momentum.

 

CBOT soybean futures are called to start the session 5 to 7 cents higher.

 

The USDA report should provide further fuel to the bullish theme in the market, with a strong technical presence and spillover support from the neighboring wheat market lending strength as well, analysts said.

 

USDA reported 2007-08 soybean production at 2.619 billion bushels, down from the August estimate of 2.625 billion and below the average of trade estimates at 2.650 billion. The 6 million bushel drop in output is based on lower yield prospects, especially in the south, USDA said in the report.

 

"USDA's soybean crop production estimate actually ran counter to the general consensus," said Bill Nelson, associate vice president with A.G. Edwards and Sons in St. Louis.

 

The USDA estimated 2007-08 soybean ending stocks at 215 million bushels, down 5 million from August, and below the average of estimates at 217 million. With weaker production and strong domestic demand, soybean exports will be scaled back, the USDA said in the supply and demand report.

 

The newly reduced forecast for U.S. soybean exports is 975 million bushels, a 45-million-bushel drop from the August forecast of 1.02 billion.

 

USDA lowered 2006-07 ending stocks by 20 million bushels to 555 million. Exports were raised 15 million bushels, and the crush was raised 10 million bushels. The USDA sharply reduced 2006-07 and 2007-08 soyoil ending stocks by 480 and 520 million pounds respectively.

 

The drop in 06-07 soyoil stocks reflected increased domestic use for biodiesel and higher projected exports, USDA reported.

 

"Soybean yield and carryout projections were at the low end of estimates, but the big move was seen in the nearly 500 million pound reduction in soyoil 06-07 ending stocks and that should be very supportive to the market," said Mike Zuzolo, senior analyst with Risk Management Commodities in Lafayette, Indiana.

 

"There was a huge decline in soybean oil stocks, which highlights strong biodiesel usage," said Nelson.

 

A technical analyst said market bulls have gained fresh upside technical momentum recently. The next upside price objective for November soybeans is pushing and closing prices above strong resistance at the contract high of US$9.49 1/2. The next downside price objective for the bears is closing prices below psychological support at US$9.00.

 

First resistance for November soybeans is seen at Tuesday's high of US$9.21 and then at US$9.25. First support is seen at Tuesday's low of US$9.13 1/2 and that at this week's low of US$9.07 1/2.

 

September soybean deliveries totaled 1,116 lots. Customer accounts at Man Professional Clearing were the primary issuer and stopper of 824 and 320 lots respectively. The house account at Term Commodities stopped 315 lots. The last trade date assigned was Sept. 11.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday on follow-through speculative buying amid a positive outlook for Chicago Board of Trade soybean futures. The benchmark May 2008 soybean contract settled up RMB9 at RMB4,008 a metric tonne, after trading between RMB3,991 and RMB4,032/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivative Exchange ended higher Wednesday on fresh buying, taking cues from firm soyoil and crude oil prices, said market participants. The benchmark November contract ended MYR20 higher at MYR2,520 a metric tonne after briefly touching an intraday high of MYR2,525/tonne.