January 12, 2006

 

CBOT Soy Outlook on Thursday: Down 8-12 cents following USDA reports

 

 

Soybean futures on the Chicago Board of Trade are seen starting Thursday's session sharply lower, pressured by bearishly construed supply data from the U.S. Department of Agriculture.

 

"The market was anticipating bearish numbers, but with a 500 million bushel carryout, record first quarter stocks, the USDA has opened the door for prices to backpedal through key resistance levels," said a CBOT commission house broker.

 

Floor traders call the market to open 8 to 12 cents lower, gapping below the low end of a chart gap at US$5.79 as the market attempts to drive prices to levels that will help spur consumption.

 

Favorable weather outlooks for Argentine soy crops is seen adding to the defensive tone, with only the potential for additional index fund buying and oversold conditions potentially limiting declines, traders added.

 

Technical analysts said first resistance for March soybeans is seen at US$5.89 1/2--Wednesday's high--and then at US$5.96 1/2. First support is seen at US$5.83--Wednesday's low--and then at US$5.79.

 

USDA reported U.S. soybean production for the 2005-06 marketing year at 3.086 billion bushels versus 3.043 billion in the USDA's November report. The survey of estimates ranged between 3.020 billion bushels to 3.101 billion.

 

The USDA projected 2005-06 U.S. soybean ending stocks at 505 million bushels, well above the average trade estimate of 452 million, and near the high end of analyst estimates that spanned from 405 million to 508 million.

 

Soybean exports were reduced 70 million bushels to 950 million bushels primarily due to continued weak sales to the European Union and China, USDA said. Export competition from South America has been unusually strong in recent months, reflecting large available supplies from record 2004-05 soybean crops, USDA reported.

 

Based on higher production forecasts, and reported usage from the domestic and export sectors, USDA reported soybean stocks as of Dec. 1 at 2.502 billion bushels, above the average trade estimate of 2.442 billion and above a range of 2.399 to 2.482 billion.

 

Export sales from the USDA were 448,100 metric tonnes versus estimates of 450,000 to 650,000 tonnes. Soymeal sales were 70,900 metric tonnes compared to estimates of 50,000 to 100,000 tonnes. Soyoil sales came in at 300 tonnes while trade guesses were 2,000 to 7,000 tonnes.

 

DTN Meteorlogix Weather Service said increasing rainfall and cooler temperatures through the weekend will ease stress to developing corn and soybeans after several weeks of above normal temperatures and below normal rainfall in Argentina. More rain is likely during the second half of next week, further improving crop conditions.

 

Meanwhile, a total of 922 delivery notices were redelivered against the January soybean contract. The last date assigned was Jan. 11. A total of 547 delivery notices were posted against January soyoil. The last date assigned was Jan. 11, and 65 delivery notices were reported against the January soymeal future. The last trade date assigned was Dec. 13.

 

In overseas markets, soybean futures on China's Dalian Commodity Exchange settled lower Thursday, continuing a retreat since Monday, on losses in soybean futures on the Chicago Board of Trade. The benchmark May 2006 soybean contract settled RMB30 lower at RMB2,682 a metric tonne after trading between RMB2,668 and RMB2,699/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended little changed Thursday after a range-bound, choppy day as concerns about high nearby stocks were offset by an optimistic demand outlook for the coming months. The benchmark March CPO contract ended unchanged at MYR1,417 a metric tonne.

 

Rotterdam soybeans were mostly lower and soymeal prices were mixed and European vegoils were flat to lower.