September 12, 2008


CBOT Soy Outlook on Friday: Up 25-30 cents on supportive USDA report, dollar



Supportive production data from the U.S. Department of Agriculture's crop report coupled with a weaker U.S. dollar is seen buoying Chicago Board of Trade soybean futures Friday.


CBOT soybean futures are called 25 to 30 cents higher.


The report, which was released early Friday, confirmed the market view of a reduction in 2008-09 output by recognizing there were some August crop production problems, analysts said.


USDA reported 2008-09 soybean production at 2.934 billion bushels, down 39 million from the August estimate of 2.973 billion based on lower yields, especially in the eastern corn belt. The average of analysts' estimates anticipated a crop size of 2.950 billion bushels. The 2008-09 U.S. soybean yield was estimated at 40.0 bushels per acre, down from August estimate of 40.5.


The report will keep the focus on crop conditions and could promote predictions of further yield reductions down the road, said Mike Zuzolo, analyst with Risk Management Commodities Inc.


The U.S. soybean market has razor thin supplies and that may pull some psychology away from outside markets, particularly after recent price setbacks, Zuzolo added.


The USDA forecast 2008-09 U.S. soybean ending stocks at 135 million bushels, unchanged from August, but below the average analyst estimate of 146 million. The USDA pegged 2007-08 soybean stocks at 140 million, up 5 million from August. The average of analysts' pre-report estimates was 143 million.


It raised 2007-08 exports 10 million bushels to 1.155 billion bushels. Crush was trimmed 15 million bushels to 1.830 billion reflecting a slowdown in domestic soybean meal disappearance, USDA reported.


Weakness in the U.S. dollar is seen adding strength to prices, with short covering and end user buying seen aiding the higher tone. The confirmation of lower yields will put end users on notice, said Zuzolo.


A weaker U.S. dollar is bullish for commodities as most raw materials are dollar-denominated, making it less expensive for foreign buyers to import.


A market technician said the next upside price objective for November soybeans is to push and close prices above solid technical resistance at US$12.07 a bushel. The next downside price objective is pushing and closing prices below solid technical support at the May low of US$11.64 3/4.


First resistance for November soybeans is seen at Thursday's high of US$11.88 and then at US$12.00. First support is seen at Thursday's low of US$11.65 and then at this week's low of US$11.57.


The DTN Meteorlogix weather forecast said crops in the U.S. Midwest should continue to mature as temperatures stay above freezing during the next 10 days. Rainfall at the end of this week and during the weekend may favor late filling crops, especially through southern and eastern areas. However, where moisture associated with hurricane Ike gets involved there could be flooding.


In the U.S. Delta, rainfall associated with hurricane Ike and its induced surface trough should track through this area during the weekend. It appears that the heaviest rains will occur north and west of Memphis but this could slide a little either way, Meteorlogix said.


In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled higher Friday on expectations of a bullish USDA report. The benchmark January 2009 soybean contract settled RMB61 or 1.5% higher at RMB4,065 a metric tonne.


Cash soybean prices in China's major producing areas were lower in the week to Friday as traders weren't willing to buy ahead of the harvest.


Crude palm oil futures on Malaysia's derivatives exchange ended 3.1% higher Friday on short-covering and spillover strength from soyoil and crude, erasing at least some of this week's losses, said trade participants. The benchmark November contract on Bursa Malaysia Derivatives ended MYR71 higher at MYR2,380 a metric tonne, after reaching an intraday high of MYR2,392.

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