August 11, 2006

 

CBOT Soy Outlook on Friday: Up 5-7 cents; supportive USDA crop data

 

 

Soybean futures on the Chicago Board of Trade are seen starting Friday's session firmly, bolstered by supportive 2006 U.S. crop data from the U.S. Department of Agriculture.

 

Soybeans are called to open 5 to 7 cents higher.

 

The USDA's smaller than expected production estimate will set the stage for prices initially, with traders anticipating speculative short covering to emerge amid the heavy buildup of short positions in the market, analysts said.

 

However, some traders said a sharply higher soybean opening could be a selling opportunity, as the USDA has not embraced the potential effect of August weather on the crop at this point.

 

The crop findings are as Aug. 1, and since that date crop conditions have been fairly benign, opening up the possibility of this being the lowest crop estimate of the year, said a CBOT commission house broker.

 

Nevertheless, "even if you factor in an increase in yields production next month, ending stocks are down significantly from last month and with the market's build up of speculative shorts, soybeans are due to blow off a few positions," a CBOT floor analyst said.

 

The USDA pegged 2006-07 soybean production at 2.928 billion bushels versus the average of trade estimates at 3.020 billion. Soybean yield is projected at 39.6 bushels per acre, down 3.7 bushels from 2005's record yield and below the average of trade estimates at 40.8. 2006-07 U.S. ending stocks are estimated at 450 million bushels, well below the average of trade estimates at 571 million. 2005-06 ending stocks were trimmed to 515 million bushels from July's estimate of 545 million.

 

Meanwhile, market technicians said serious near-term chart damage has been inflicted this week. The next downside price objective for the bears is solid technical support at US$5.70, and it will take a close above technical resistance at US$5.94 - meaning filling this week's big downside price gap on the daily bar chart - to provide fresh upside technical momentum.

 

First resistance for November soybeans is seen at US$5.81 1/2 - Thursday's high-and then at US$5.86 1/2 - this week's high. First support is seen at US$5.73 1/2 - Thursday's low - and then at US$5.70.

 

The DTN Meteorlogix forecast said during the next several days a continuation of the pattern of showers and thunderstorms across the entire Midwest is on tap. These showers will offer an opportunity for soybeans to add more pods during the latter part of this growing season. The benefit to crop yield prospects will be greater for soybeans, due to the soybean growth cycle reaching its main reproductive stage this month, Meteorlogix said.

 

Rotterdam soybeans were higher and soymeal prices were mostly steady. European vegoils were flat to higher.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled mostly lower Friday, tracking overnight losses on the Chicago Board of Trade.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended moderately higher Friday, following a volatile trading day amid uncertainty about the direction of a market already at two-year highs. The benchmark October contract ended at MYR1,659 a metric tonne, up MYR4 from Thursday.