May 11, 2007

 

CBOT Soy Outlook on Friday: Up 5-7 cents on USDA data, spillover from corn

 

 

Chicago Board of Trade soybean futures are seen starting Friday's day session on firm footing, underpinned by supportive balance sheet projections from U.S. Department of Agriculture and spillover strength from corn.

 

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

 

The USDA's data was friendly for soybeans, with the USDA's first look at the new crop balance sheet cutting ending stocks nearly in half from record 2006-07 carryout projections, said Don Roose, president of U.S. Commodities in West Des Moines, IA.

 

The extent of the gains would be tied to the buying interest of the speculative sector, with a smaller than expected cut in old crop inventories a drain on nearby contracts, reflecting the abundance of available old crop inventories, analysts said.

 

Nevertheless, the overall theme of the report was bullish and with corn seen opening strong, speculative buyers are seen repositioning themselves in the market, analysts said.

 

The market went into the report leaning with a negative bias, and that should attract some buyers, particularly with some traders caught on the wrong side of the market, said Jack Scoville, analyst with the Price Futures Group in Chicago.

 

The USDA estimated U.S. 2006-07 soybean ending stocks at a record 610 million bushels, down 5 million from the April estimate of 615 million, but above the average analyst estimate of 607 million bushels. The decline in ending stocks was attributed to a 5 million bushel increase in the crush.

 

The USDA in its first projections for the 2007-08 crop year, estimated soybean ending stocks at 320 million bushels, down nearly half from 2006-07 and below the average of estimates at 337 million.

 

Exports were pegged at 1.080 billion bushels, and the crush was estimated at 1.790 billion. USDA reported 2007-08 soybean production at 2.7 billion bushels, down 443 million bushels from the 2005/06 record. Soybean supplies are projected to reach 3.4 billion bushels, down 8% from 2006/07 despite sharply higher beginning stocks. Soybean crush is projected to increase 1% to 1.8 billion bushels, reflecting limited growth prospects for domestic soybean meal use and soybean meal exports. In contrast, rapidly expanding production of biodiesel from soybean oil is contributing to a projected 6% increase in domestic soybean oil disappearance. Biodiesel production is projected to use 19% of total soybean oil production for 2007/08 compared with 13% in 2006/07. Soybean exports are projected at 1.1 billion bushels for 2007/08, unchanged from 2006/07.

 

Global oilseed production for 2007/08 is projected at 399 million tonnes, down 3.8 million tonnes from 2006/07. If realized, this will be the first year-to-year decline in global oilseed production since 1995/96, USDA said. Lower production in the U.S. will be partly offset by increased foreign production.

 

A technical analyst said a 2 1/2-month-old downtrend line is still in place on the daily bar chart. Soybean bulls would regain fresh upside technical momentum by producing a close above solid chart resistance at the May high of US$7.58 1/2 basis the July future. The next downside price objective is closing prices below solid support at the April low of US$7.25 1/2.

 

First resistance for July soybeans is seen at this week's high of US$7.51 and then at US$7.55. First support is seen at US$7.43 1/2 and then at US$7.40.

 

Deliveries posted against the CBOT May soy future reached 514 contracts. Large issuers included the customer account of Man Professional Clearing which issued 322 contracts and the customer account of Combs, a division of Cunningham, which issued 149 contracts. Large stoppers included the customer account of the Astro division of UBS, which stopped 236 contracts, and the customer account of Man Professional Clearing, which stopped 158 contracts. The last trade assigned was May 10. Preliminary open interest in May was 662 contracts.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled mixed Friday, with the market cautious ahead of the USDA's May supply/demand report. The benchmark September 2007 contract settled RMB2 lower at RMB3,143 a metric tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended moderately higher Friday, boosted by overall bullish sentiment, although trading was dull and upside room was limited by a lack of action by major market players, traders said. The benchmark July contract settled up MYR5 at MYR2,325 a metric tonne.