June 19, 2007

 

CBOT Soy Outlook on Tuesday: Down 6-8 cents; profit taking on Midwest rains

 

 

Soybean futures on the Chicago Board of Trade are expected to start Tuesday's day session lower, pressured by profit taking pressure amid beneficial rains moving through the Midwest.

 

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

 

In overnight e-CBOT trading, July soybeans were 6 1/4 cents lower at US$8.49 per bushel, and November was 6 1/2 cents lower at US$8.82 1/2.

 

Midwest rains are taking a little edge off the market, as traders factor in the potential for improved crop conditions if a wetter trend takes shape in the region, analysts said.

 

Spillover pressure from corn and wheat, overnight declines in Asian palm oil futures coupled with overbought market conditions are seen aiding the lower theme, analysts added.

 

However, traders said the overall trend of the market remains supportive, with downside movement limited amid end user buying on breaks and continued worries over a moisture blocking ridge moving into the crop belt later this week, a CBOT floor trader said.

 

A market technician said the bulls still have upside momentum and are looking for more on the upside in the near term. However, a decent corrective pullback soon would not be surprising and would not likely be bearish. The next upside price objective for July soybeans is closing prices above solid technical resistance at US$9.00. The next downside price objective is closing prices below solid support at US$8.25.

 

First resistance for July soybeans is seen at Monday's contract high of US$8.59 and then at US$8.70. First support is seen at Monday's low of US$8.46 and then at US$8.37.

 

The DTN Meteorlogix Weather Service forecast said Tuesday's US and European weather models are in fair to good agreement through day 7, fair agreement during days 8-10. One more upper level disturbance is on tap before a moisture blocking ridge builds into the Midwest region. This disturbance should produce storms in the area Thursday night into Friday. The ridge will move over the Midwest Sunday, Monday and Tuesday.

 

Meanwhile, additional thunderstorm activity is seen for the western Midwest for the next few days. This should maintain favorable growing conditions. Hotter weather later this weekend is not expected to last long enough to significantly stress crops in the region, Meteorlogix reports.

 

In the eastern Midwest, a few thunderstorms in the region Tuesday and again Friday will help ease stress to crops somewhat but a more widespread rain is needed. Long range charts suggest that hot, dry weather will cover this area Sunday through Tuesday before another weak front causes a few showers Wednesday or Thursday, Meteorlogix forecasts.

 

U.S. Department of Agriculture in its crop progress report Monday, said U.S. soybeans in good-to-excellent condition declined 5 percentage points to 65% from last week's 70%. Analysts had predicted a condition ratings drop of 2-5 percentage points.

 

Illinois's and Ohio's good-to-excellent condition ratings both fell 15 percentage points to 52% and 49%, respectively. Indiana's soybean good-to-excellent condition rating fell to 43%, down 13 percentage points from last week.

 

Analysts said the declines were expected and weren't a surprise, adding that soybean conditions still have time to improve so long as they receive some rain.

 

In overseas markets, crude palm oil futures on the Bursa Malaysia Derivatives ended lower Tuesday on profit-taking and speculative selling, traders said. The benchmark September contract ended at MYR2,436 a metric tonne, down MYR21 from Monday.

 

Meanwhile, volume on Singapore's Joint Asian Derivatives Exchange was thin at 22 lots, although an increase over the 16 lots traded Monday.

 

Soybean futures traded on the Dalian Commodity Exchange settled lower Tuesday on ample supply. The benchmark January 2008 soybean contract settled RMB26 lower at RMB3,318 a metric tonne.