May 12, 2006

 

CBOT Soy Outlook on Friday: Up 5-10 cents, following USDA report

 

 

A supportive supply and demand report from the government should propel soybean futures at the Chicago Board of Trade on Friday, analysts said.

 

Soybeans are called to open 5 to 10 cents firmer.

 

The early morning focus for the market is the May supply and demand report from the U.S. Department of Agriculture. USDA released its first estimate of the new-crop ending stocks, estimating ending stocks at 650 million bushels. This compares to the average trade estimate of 678 million bushels for 2006-07 soybeans. The November contract and beyond represent the new-crop and this news will particularly impact those contracts.

 

For old-crop, USDA kept its estimate of 2005-06 ending stocks at 565 million bushels versus an average trade estimate of 568 million bushels.

 

In world numbers, USDA cut Brazil's soybean output figure to 56.5 million metric tonnes, compared to last month's estimate of 57 million tonnes. Argentine production was unchanged at 40.5 million metric tonnes.

 

The USDA did not provide any data that should knock the market off its bullish course, especially after another 27 year high in June gold futures overnight, said Mike Zuzolo, senior analyst with Risk Management Commodities Inc. in Lafayette, Ind.

 

The direction of the market beyond the first half hour is on the minds of traders, as fundamentals have taken a backseat in the overall focus of the market. Technical runs are having more bearing on current market direction. Market technicals are strong and with inflation worries fueling momentum, bullish traders remain confident, said a CBOT trader.

 

Meanwhile, analysts say with burdensome ending inventory projections, the high price levels are attractive hedges and may limit an all out blow out to the upside.

 

Technical analysts say market bulls have the slight technical advantage, at present, and gained some more momentum Thursday. However, it will take a close above solid resistance at the February high of US$6.28 to provide better upside technical momentum. A close below support at US$5.91 would provide fresh downside technical momentum.

 

First resistance for July soybeans is seen at US$6.17--Thursday's high--and then at US$6.20. First support is seen at US$6.07 1/2--Thursday's low--and then at US$6.04.

 

U.S. Midwest cash soybean basis bids are mostly unchanged to lower Friday, cash dealers said. Spot cash soybean bids were down 3 1/2 cents in Peoria, Ill., down 4 cents in St Louis, MO, and 5 cents lower in Des Moines, IA, according to cash sources Friday.

 

The DTN Meteorlogix Weather Service forecast said there is a chance for some light precipitation through northeast Iowa and in eastern Minnesota during today and Saturday, Mainly dry conditions are on tap Sunday, while temperatures will average well below normal with widespread frost or light freezing temperatures expected over the next three days.

 

Episodes of light rain or drizzle are expected through northern and eastern areas of during today and Saturday in the eastern Midwest. Showers or light rain may linger into Sunday. Temperatures average well below normal, with a chance for freezing temperatures in Wisconsin, northern Illinois and Michigan during this period.

 

In deliveries, a total of 231 delivery notices were posted against the CBOT May soybean contract. The house account at Term Commodities issued 105 lots. The last trade date assigned was May 10. A total of 248 delivery notices were posted against May soyoil. The house account at ADM Investor Services stopped 124 lots. The last trade date assigned was May 10.

 

Rotterdam soybeans were higher and soymeal prices were mostly lower, and European vegoils were steady to higher.

 

In news, China's soybean imports totaled 2.57 million metric tonnes in April, up 35% on year from 1.91 million tonnes, the customs department said Friday. In the January to April period, soybean imports rose 9.1% on year to 7.98 million tonnes, according to customs' preliminary data.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled higher Friday on overnight gains in Chicago Board of Trade soybean futures, although pre-weekend profit-taking trimmed gains. The benchmark September 2006 soybean contract settled RMB12 higher at RMB2,695 a metric tonne, after trading between RMB2,669/tonne and RMB2,709/tonne.