January 7, 2010

 

CBOT Soy Outlook on Thursday: Lower; China tightening, export fears

 

 

Soybean futures on the Chicago Board of Trade are poised to start Thursday's day session with sharp declines on fears of reduced export demand following China's liquidity tightening overnight.

 

CBOT soybean futures are seen starting 16 cents to 18 cents lower. In overnight trade, January soybeans were 18 1/2 cents lower at US$10.32, and March soybeans were 18 3/4 cents lower at US$10.40 1/4.

 

The unexpected boost in one of China's key lending rates is seen tightening liquidity in an effort to curb inflation and rising commodity prices, analysts said.

 

China's central bank raised a key interbank market interest rate Thursday for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the New Year.

 

The news raises fears of slowing U.S. soybean export demand, as China's appetite for soybeans has been, and continues to be, the underpinning feature for U.S. soybean exports. Since Sept. 1, total U.S. soybean export commitments total 32.265 million metric tonnes, with China accounting for 19.757 million of the sales.

 

A firmer U.S. dollar and broad-based weakness in commodity markets is seen aiding the defensive tone, with rising South American crop estimates expected to trigger profit-taking pressure as well.

 

However, the anticipation of fresh investment money entering the market Friday, as index funds rebalance positions, is seen providing support to limit downside risks during the session.

 

A technical analyst said the next upside technical objective for March soybeans is pushing and closing March prices above solid technical resistance at US$10.84. The next downside price objective is pushing and closing prices below solid technical support at US$10.27.

 

U.S. Department of Agriculture reported total weekly soybean export sales were a net 726,100 metric tonnes for the week ended Dec 31, with China as the primary buyer, at 452,600 tonnes. Analysts had forecast sales between 400,000 and 1,000,000 metric tonnes.

 

USDA reported 1,179,000 metric tonnes were shipped in the week ended Dec. 31, down 14% from the previous week and 21% from the prior four-week average. The primary destination was China with 641,100 metric tonnes.

 

Soymeal sales were a net 61,800 tonnes. Trade estimates ranged from 100,000 to 300,000 tonnes. Soyoil commitments were 3,500 metric tonnes. Analysts had forecast sales between zero and 25,000 tonnes.

 

National Commodities Supply Corp., or Conab, on Thursday pegged Brazil's 2009-10 soy crop at 65.2 million metric tonnes. Conab's crop estimate for the record-breaking 2009-10 soy crop is 14% above the 2008-09 crop of 57.2 million tonnes. Conab's latest estimate compared to its prior estimate in December, which was 64.6 million tonnes.

 

Meanwhile, the agricultural survey group of Brazil's Census Bureau, the IBGE, on Thursday put the upcoming 2009-10 soy crop at 65.2 million metric tonnes. The new estimate compares to IBGE's estimate on Dec. 8 of 64.9 million metric tonnes for 2009-10.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Thursday as concern over government credit tightening triggered profit-taking. The September 2010 soybean contract settled RMB50 or 1.2% lower at RMB4,090 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange fell Thursday, pressured by favorable weather, crop prospects in South America and a broad-based selloff in commodity markets, trade participants said. The March contract on the Bursa Malaysia Derivatives market ended MYR72 lower at MYR2,630 a metric tonne.