July 29, 2008


CBOT Soy Outlook on Tuesday: Lower; pressured by crop ratings, weather



Chicago Board of Trade soybean futures are seen starting Tuesday's day session on the defensive, pressured by improving crop ratings, and disagreements in weather outlooks.


CBOT soybean futures are called 15 to 20 cents lower.


In overnight electronic trading, August soybeans were 22 cents lower at US$13.78 1/4 and November soybeans were 21 1/2 cents lower at US$13.74 1/2. December soyoil was 110 points lower at 59.50 cents per pound and December soymeal was US$5.60 lower at US$358.70 per short tonne.


Soybean crop ratings improved again, up 4% from last year, and that makes it hard to advance prices at already lofty levels when the crop continues to improve, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.


U.S. Department of Agriculture reported 62% of the U.S. soybean crop was in good to excellent condition, up one percentage point from last week and above the 58% reported at the same time last year.


Illinois soybeans improved by 3 percentage points and Iowa soybeans are up one percentage point from last week.


The ratings increase is sparking ideas the crop is getting larger perceivably, Roose added.


The USDA said 62% of the soybean crop had bloomed, up from 45% a week earlier, but still far short the 79% five-year average. Twenty-one percent of the crop was reported setting pods, below the five year average of 38%.


Disagreements in weather models are adding to the losses, with some forecasters projecting hot, dry conditions later this week will be short lived, as cooler, wetter conditions return next week.


Lower crude oil and gold futures coupled with technical liquidation is seen contributing to the lower theme.


The DTN Meteorlogix weather forecast calls for generally favorable weather for flowering soybeans with no persistent hot or dry weather indicated. A brief period of temperatures reaching the middle 90s Fahrenheit is possible later this week before scattered showers and thunderstorms return during the early to middle part of next week.


However, above to much above normal temperatures and below normal rainfall will continue to stress developing soybeans in the U.S. Delta, Meteorlogix reports.


Soybean crops have improved through the month of July based on farmer and crop scout assessments and as reflected in the USDA's weekly crop progress and crop condition ratings, said Joel Karlin, analyst with Western Milling in a market report. Realization that all summer the weather models have been forecasting intrusions of heat into the Midwest yet none of these forecasts have ever verified is adding to the losses, he added.


A market technician said prices are in a four-week-old downtrend on the daily bar chart. The next upside price objective for November soybeans is to push and close prices above solid technical resistance at US$14.50 a bushel. The next downside price objective is pushing and closing prices below solid technical support at last week's low of US$13.56.


First resistance for November soybeans is seen at US$14.00 and then at Monday's high of US$14.21. First support is seen at Monday's low of US$13.80 1/4 and then at US$13.75.


In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled sharply lower on bearish sentiment, despite a slight rise at CBOT Monday. The benchmark January 2009 soybean contract settled RMB114, or 2.5%, lower at RMB4,519 a metric tonne.


Crude palm oil futures on Malaysia's derivatives exchange continued to decline Tuesday, falling 4.7% to break below MYR2,900 a metric tonne for the first time in 2008, on expectations of a sharp rise in output and spillover weakness from soyoil, traders said. The benchmark October contract on Bursa Malaysia Derivatives ended MYR32 lower at MYR2,969 a metric tonne.

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