June 5, 2007
CBOT Soy Outlook on Tuesday: Up 10-13 cents; tech strength, weather, palm oil
Chicago Board of Trade soybean futures are expected to start Tuesday's day session on firm footing, continuing the overnight climb to new contract highs on technical momentum, world vegoil price strength and long range weather concerns.
CBOT soybean futures are called to start the session 10 to 13 cents higher.
In overnight e-CBOT trading, July soybeans were 13 1/4 cents higher at US$8.29 per bushel, and November was 12 cents higher at US$8.58 1/4.
The market is feeding off bullish technical momentum, with speculative buying amplifying the gains, analysts said. The supportive influence of record high prices in Malaysian palm oil futures, and long range forecast targeting a potential moisture blocking ridge moving into the eastern Midwest are serving as the fundamental catalysts, analysts added.
The market is shrugging off historically high planting progress and crop ratings, focusing more on long range concerns amid outlooks for shrinking inventories in the 2007-08 marketing year, a CBOT analyst said.
Nevertheless, overbought market conditions may produce some profit taking opportunities if the market fails to attract follow through buying as prices move near overnight highs, he added.
A market technician said futures continue to maintain upside momentum, with the next upside price objective for July soybeans is closing prices above solid technical resistance at Monday's contract high of US$8.23 1/2. The next downside price objective is closing prices below solid support at US$8.00.
First resistance for July soybeans is seen at US$8.20 and then at US$8.23 1/2. First support is seen at Monday's low of US$8.13 1/2 and then at US$8.10.
The DTN Meteorlogix Weather Service forecast said Tuesday's U.S. and European weather models are in fair to good agreement. A ridge on the extended range charts appears to be over eastern or northeastern Canada, with a weaker subtropical ridge mainly over the lower Mississippi and Ohio rivers and the southeast U.S. This is likely a wet pattern for the western Midwest, but it is likely a dry pattern for the Delta, southeast U.S. and Ohio River valley.
Meanwhile, the near-term forecast calls for showers and thunderstorms to maintain favorable moisture conditions for emerging and developing crops in the western Midwest. In the eastern belt, despite recent showers some locations are still too dry, especially in central Illinois, Meteorlogix reports.
U.S. Department of Agriculture reported Monday, 88% of the U.S. soybean crop was planted as of June 3, compared to 88% last year and the five-year average of 81%.
Several eastern U.S. Midwest states reported soybean plantings ahead of the pace in 2006. In Illinois, 96% of the crop was planted, compared to the five-year average of 81%. In Minnesota, 99% of the crop was seeded, compared to the five-year average of 91%.
The USDA's first soybean conditions rating of the season showed that 69% of the U.S. soybean crop was rated in good-to-excellent condition, within analyst estimates of 68%-70%. Nationally, 70% of the crop was emerged, compared to 66% in 2006 and the five-year average of 56%.
In overseas markets, crude palm oil futures on the Bursa Malaysia Derivatives surged to a fresh record Tuesday, boosted by persistent concerns about tight supply and talk of a hike in Indonesian export taxes. The benchmark August contract ended at MYR2,701 a metric tonne, up MYR100 from Monday.
Soybean futures traded on the Dalian Commodity Exchange settled mostly higher Tuesday, supported by higher prices at the CBOT Monday. The benchmark January 2008 soybean contract settled RMB3 higher at RMB3,341 a metric tonne.