May 25, 2007

 

CBOT Soy Outlook on Friday:Up 6-8 cents; adding premium on dry east midwest

 

 

Soybean futures on the Chicago Board of Trade are seen opening Friday's day session trade firmly underpinned, as the market adds weather premium amid lingering concerns over dry eastern Midwest conditions, analysts said.

 

CBOT soybean futures are called to start the session 6 to 8 cents higher.

 

In overnight e-CBOT trading, July soybeans were 8 cents higher at US$8.13 1/4 per bushel, and November were 8 1/4 cents higher at US$8.42 1/2.

 

Dry areas of the eastern Midwest crop belt continue to miss out on rain opportunities, with a rain system that passed through the western Midwest moving northward away from parched areas in the region, analysts said.

 

Forecasts for the weekend and next week only call for spotty showers, leaving many traders unwilling to abandon long positions amid fears that if rains don't materialize during the extended holiday weekend, it could cost a lot more to regain those positions, a CBOT floor trader said.

 

CBOT markets will be closed Monday in observance of the Memorial Day holiday.

 

Additionally, supportive technical signals and long term outlooks for shrinking supplies amid growing global demand remain underpinning forces, traders said. Sharply higher Malaysian Palm oil futures are seen leading soyoil futures to new highs and that should lend support to soybeans also, traders added.

 

However, analysts said late end-of-the-week and pre-holiday positioning should arise to create some selling pressure before the end of the day.

 

A technical analyst said market bulls have upside technical momentum on their side. The next upside price objective for July soybeans is closing prices above solid technical resistance at the contract high of US$8.22. The next downside price objective is closing prices below solid support at US$7.85.

 

First resistance for July soybeans is seen at Thursday's high of US$8.09 1/2 and then at US$8.22. First support is seen at US$8.00 and then at US$7.95.

 

The DTN Meteorlogix Weather Service forecast said only a few light showers of mostly less than 0.25 inch is on tap for the eastern Midwest Friday. Scattered showers and possible thundershowers are seen for the region during the weekend. Rainfall should average 0.25-0.75 inch and locally heavier through northern and some central areas, 0.10-0.50 inch through the southern parts of the belt. Temperatures will average near to below normal northwest and above normal elsewhere Friday and Saturday. Sunday, temperatures will average below normal in the north and above normal south.

 

Dry conditions or with only a few light showers are scheduled for Monday. Scattered light to moderate showers with possible thundershowers are seen for Tuesday or Wednesday. Rainfall potential with this system looks to be 0.25-0.75 inch and locally heavier. Temperatures will average near to above normal Monday and Tuesday, and cooler Wednesday, Meteorlogix forecasts.

 

In overseas markets, crude palm oil futures on the Bursa Malaysia Derivatives ended sharply higher in busy trade Friday as the market continued to rally amid fears of a supply shortage. The benchmark August contract ended up MYR53 at MYR2,498 a metric tonne, after touching a high of MYR2,503/tonne.

 

Soybean futures traded on the Dalian Commodity Exchange settled higher Friday, following Thursday's gains at CBOT. The benchmark September 2007 soybean contract settled RMB3 higher at RMB3,252 a metric tonne.

 

Meanwhile, cash soybean prices in China's major producing regions were higher in the week ended Friday, as farmers have limited stocks on hand.