June 16, 2008

 

CBOT Soy Outlook on Monday: Seen 20-25 cents higher on Midwest flooding

 

 

Ongoing concerns about flooding in key Midwestern crop areas are expected to shove Chicago Board of Trade soybean futures 20 to 25 cents per bushel higher Monday.

 

In overnight electronic trading, CBOT July soybeans soared 19 3/4 cents to US$15.79 3/4. November soybeans jumped 24 3/4 cents to US$15.55 3/4.

 

Excessive wetness, particularly in the top soybean-producing state of Iowa, continues to support CBOT soybeans and corn amid worries the water will lower yields and force producers to abandon acres.

 

"It's all about weather," said Joe Victor, vice president of marketing for Allendale.

 

The Midwest region could get a break from moisture in the near-term as "a deepening eastern USA trough may be strong enough to hold the heavier rains either south or west," DTN Meteorlogix said. However, eventually when the trough weakens and the warm air tries to move back into the Midwest, it will begin to rain again, the private weather firm said.

 

Crude palm oil futures on Malaysia's derivatives exchange ended higher Monday with support from the adverse weather in the U.S., trade participants said. Palm oil is a substitute for soyoil and closely tracks soyoil price movements.

 

Tensions between Argentine farm groups and the country's government also remain supportive for old-crop CBOT soybeans, Victor said. A recent farmers' strike in Argentina has shifted soy demand to the U.S. from South America.

 

Tensions reached new heights in the three-month farm conflict during the weekend after national guardsmen temporarily detained a key leader of the rural protest movement. That prompted farmers to retaliate by vowing to restore their blockades in protest over a soy export tax.

 

"Argentina is an absolute mess," Victor said. "It's growing uglier day by day, and that is only beneficial to old-crop soybeans."

 

In other news, soybean crush rates for May in the National Oilseed Processors Association's monthly soybean crush report were below the average of analysts' estimates but within the range of pre-report estimates. NOPA said 144.002 million bushels of soybeans were crushed, compared to the average analyst estimate of 145.3 million and the range of 143 million to 147 million.

 

The NOPA report should take a back seat in the market to the weather and Argentina, traders said. The market also will look at the weaker U.S. dollar index, which was seen as supportive, they said.

 

CBOT July soybeans on Friday closed solidly higher, near the session high, at a bullish weekly high close and at another fresh 13-week high. Bulls have "solid upside near-term technical momentum" on their side, a technical analyst said.

 

The next upside price objective for bulls is to push and close July soybeans above solid technical resistance at the contract high of US$15.95 3/4, the analyst said. The next downside price objective for the bears is pushing and closing prices below psychological support at US$15.00.

 

First resistance for July soybeans is seen at Friday's high of US$15.71 3/4 and then at US$15.95 3/4. First support is seen at US$15.46 3/4 and then at Friday's low of US$15.20 1/4.