June 11, 2007

 

CBOT Soy Outlook on Monday: Up 8-10 cents, weather trumps neutral USDA report

 

 

Chicago Board of Trade soybean futures are seen starting Monday's day session on firm footing, with near term weather a supportive force in the absence of any surprises in Monday's supply and demand report.

 

CBOT soybean futures are called to start the session 8 to 10 cents higher.

 

"I feel soybeans will continue their overnight strength, since there weren't any big shifts in the U.S. Department of Agriculture supply/demand numbers today. This report does not throw any cold water on the soybean rally that's been occurring. The key focus now shifts to acreage," said Rich Balvanz of Ag Management Services.

 

Weather is the key focus of the market, with a moisture blocking ridge in the Midwest this week encouraging participants to add risk premium to prices, analysts said.

 

The DTN Meteorlogix Weather Service forecast said rainfall is most likely in western areas of the western Midwest this week while the east part of region is drier and warmer. Soil moisture favors developing crops. In the eastern Midwest, drier, hotter weather this week will increase stress to developing crops. There is some chance for cooler temperatures early next week. Rainfall with this cool front is somewhat uncertain at this time, Meteorlogix reports.

 

The USDA estimated U.S. 2006-07 soybean ending stocks at a record 610 million bushels, unchanged from the May estimate, but above the average analyst estimate of 598 million bushels.

 

The USDA in its second projections for the 2007-08 crop year, estimated soybean ending stocks at 320 million bushels, well below 2006-07 and slightly below the average of estimates at 328 million.

 

Exports were pegged at 1.080 billion bushels, and the crush was estimated at 1.790 billion, both unchanged from May. USDA reported 2007-08 soybean production at 2.745 billion bushels, unchanged from the May estimate.

 

Changes this month include reduced soybean oil used for biodiesel for 2006/07 and 2007/08 as returns to biodiesel production become less favorable due to higher vegetable oil prices, USDA said in the report.

 

Global soybean production for 2007/08 is projected at 225.32 million tonnes, down from 2006/07 production of 235.41 million.

 

A technical analyst said market bulls still have solid upside momentum. The next upside price objective for July soybeans is closing prices above solid technical resistance at the contract high of US$8.33. The next downside price objective is closing prices below solid support at US$8.00.

 

First resistance for July soybeans is seen at US$8.25 and then at US$8.33. First support is seen at US$8.13 and then at US$8.07.

 

The Commodity Futures Trading Commission on Friday reported in its supplemental commitment of traders report that index funds were reported to hold net long positions totaling 143,635 combined soybean futures and options contracts as of June 5, up from 141,651 the prior week.

 

Traditional large speculative traders were net long 120,576 contracts compared with net longs of 101,710 in the previous week. Commercials were reported to hold net short combined futures and options positions totaling 240,436 contracts, up from the previous week's 217,657 contracts.

 

On tap for Monday, the U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 11 a.m. EDT (1500 GMT) and weekly crop progress reports at 4:00 p.m. EDT.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled mostly lower Monday, pressured by sluggish soymeal cash prices. The benchmark January 2008 soybean contract settled RMB19 lower at RMB3,336 a metric tonne.

 

China's soybean imports in the first five months of this year totaled 11.34 million tonnes, up 9.2% from a year earlier, said the General Administration of Customs Monday. As China imported 8.37 million tonnes of soybean in the first four months, that means the country imported 2.97 million tonnes of soybean in May alone.

 

Crude palm oil futures on the Bursa Malaysia Derivatives tumbled for a second straight day Monday amid a slew of bearish factors including talk of cancellation of purchases. The benchmark August CPO contract ended at MYR2,320 a metric tonne, down MYR151, or 6%, from Friday.