October 9, 2009

 

CBOT Soy Outlook on Friday: Steady to higher; USDA report adds support

 

 

Chicago Board of Trade soybean futures are seen steady to higher at the start of Friday's day session, garnering support from lower-than-expected increases in government production and yield estimates.

 

CBOT soybean futures are seen starting steady to 5 cents higher.

 

The crop report should send some bullish signals to the market, but the data still suggest record crops - and this falls on the back of a 20 plus cent rally Thursday, analysts said.

 

The market took precaution Thursday in preparation of a bullish surprise, so the impact of the report maybe muted, a CBOT floor analyst said.

 

"First thought is we trade this report the first 15-20 minutes of the day and we go right back to outside markets," said Karl Setzer of MaxYield Cooperative in West Bend, Iowa. "The U.S. dollar is stronger this morning which is more of a factor for the market than anything else at this time," he added.

 

U.S. Department of Agriculture projected 2009 U.S. soybean production at 3.250 billion bushels with a yield of 42.4 bushels per acre. If realized, this will be the third highest yield on record, the USDA said in the report. The production figure was below the average Dow Jones survey estimate of 3.291 billion, with yields below the average estimate of 42.9. In September the USDA estimates the crop at 3.245 billion bushels using a yield of 42.3 bushels per acre.

 

The USDA projected 2009-10 soybean ending stocks of 230 million bushels, up from the September estimate of 220 million. Analysts on average estimated ending stocks of 257 million bushels.

 

"I really think that the lows in soybeans may be in if corn and wheat don't drag it down, or the U.S. dollar doesn't rally sharply," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.

 

"I think that the trade was trading nearly a 300 million bushel carryover and they have nothing to stand-on now - this suggests to me that we need to revisit that US$9.60 area in Nov futures, where the 200-day moving average rests," he added.

 

Harvest delays and strong export demand remain underpinning features in the market. These fundamental factors are seen limiting downside risks, traders said.

 

A technical analyst said first resistance for November soybeans is seen at Thursday's high of US$9.42 and then at US$9.50. First support is seen at US$9.25 and then at US$9.20.

 

The DTN Meteorlogix weather forecast said heavy rains and flooding through southern and eastern Midwest growing areas will mean significant delays to field work. A hard freeze now appears likely for most fields west of the Mississippi river, ending the growing season and causing some damage to immature crops. A freeze may extend east of the Mississippi river into parts of Illinois, Wisconsin and Michigan but it will not be as extensive an area as it will be to the west, Meteorlogix said.

 

In the Delta, rain will move in early Friday, likely delaying field work. It could be drier during the weekend but more wet weather appears likely early next week, Meteorlogix said in a forecast.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Friday - tracking a surge in local equities and a rebound on the Chicago Board of Trade during China's week-long National Day holiday break. The benchmark May 2010 soybean contract settled RMB61 a metric ton higher at RMB3,609/tonne, or up 1.7%.

 

Crude palm oil futures on Malaysia's derivatives exchange rebounded Friday, erasing the previous day's losses with support from a likely rise in exports and gains on the Dalian Commodity Exchange, trade participants said. The benchmark December contract on Bursa Malaysia Derivatives ended up MYR55, or 2.7%, at a one-week high of MYR2,085 a metric tonne.