October 12, 2006

 

CBOT Soy Outlook on Thursday: Up 2-4 cents, spillover grains, USDA data

 

 

Soybean futures at the Chicago Board of Trade are seen starting Thursday's day session on firm footing, underpinned by expected price strength in neighboring grains and supportive crop data from U.S. Department of Agriculture

 

Soybean futures are called to open 2 to 4 cents higher.

 

The USDA's crop report presents a friendly aspect to soybeans, but with a large ending stock projection, despite coming in below the average estimates, you have to wonder how much higher can we go off these numbers, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

Traders say the strength of corn and wheat should pull soybeans higher regardless of the market's bearish fundamentals, but upside movement will remain limited in the face of big supplies ready to flood the supply chain in the near term.

 

Meanwhile, concerns over potential harvest slowdowns are seen generating light support, but upside moves should produce some hedge related sales as well, analysts added.

 

Traders are said to be keeping an eye on the volatile movements in wheat, with some analysts saying the 31 cent spread between nearby soybean and wheat prices is the narrowest gap in prices that is on record, a floor analyst said.

 

The USDA pegged 2006-07 soybean production at 3.189 billion bushels, below the average of trade estimate of 3.213 million, but up 96 million from September. Soybean yield is projected at 42.8 bushels per acre, up 1 bushel from the September projection of 41.8 bushels an acre and below the average of trade estimates at 43.4. 2006-07 U.S. ending stocks are estimated at 555 million bushels, below the average of trade estimates at 588 million.

 

USDA said the higher production estimate if realized would be the highest on record and was attributed to improved crop conditions due to timely rains and cooler temperatures across the Midwest crop belt. USDA also raised planted and harvested acreage 0.6 million acres.

 

A technical analyst said it will take a close above solid technical resistance at this week's high of US$5.76 basis November futures to provide fresh upside technical momentum. The next downside price objective is closing prices below solid support at US$5.55. First resistance for November soybeans is seen at US$5.65 and then at US$5.70. First support is seen at US$5.60 and then at US$5.55.

 

The DTN Meteorlogix weather forecast says cold and dry weather the next few days will improve harvest weather after recent rains. As temperatures moderate early next week some wet weather develops disrupting the harvest. Additional rainfall is expected to develop during the second half of next week causing further harvest disruptions.

 

In deliveries, a total of 126 delivery notices were posted against the October soyoil future. A customer account at Tenco issued 101 lots with a customer account at RJ O'Brien the primary stopper of 67 lots. The last trade date assigned was October 4.

 

Rotterdam soybeans and soymeal were mixed. European vegoils were mostly flat.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Thursday ahead of anticipated record production projections from USDA's crop report. The benchmark January 2007 contract fell RMB1 to settle at RMB2,534 a metric tonne, after trading between RMB2,530/tonne and RMB2,538/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended higher Thursday, ignoring record high inventories. The benchmark December CPO contract ended at MYR1,560 a metric tonne, up MYR7 from Wednesday.