January 8, 2010

 

CBOT Soy Outlook on Friday: Seen lower on lingering China demand fears

 

 

Soybean futures at the Chicago Board of Trade are seen starting Friday's day session lower, pressured by lingering fears of slowing China demand.

 

CBOT soybean futures are seen starting 4 cents to 6 cents lower. In overnight trade, January soybeans were 5 3/4 cents lower at US$10.12, and March soybeans were 7 1/2 cents lower at US$10.18 1/2.

 

Follow-through selling from Thursday's losses amid concerns policy changes in China could damp Chinese soybean buying interest continues to place a bearish cloud over the market, a CBOT floor analyst said.

 

China's appetite for soybeans has been, and continues to be, the underpinning feature for U.S. soybean exports.

 

Rising South American production forecasts amid favorable weather conditions for developing crops is seen weighing on prices as well.

 

However, a drop in the U.S. dollar following a weaker-than-forecast report on December U.S. non-farm payrolls may provide some outside support to temper selling interest, analysts said.

 

Gold and silver futures have both rebounded from overnight losses, but crude oil futures have extended declines after the unexpected economic news.

 

Meanwhile, end-of-the-week short-covering as well as positioning ahead of anticipated index fund rebalancing buying and next week's crop reports are expected to lend support to prices during the session.

 

U.S. Department of Agriculture will release its final 2009 production forecast, supply and demand revisions and quarterly stocks reports Tuesday, 8:30 a.m. EST.

 

A technical analyst said the next upside technical objective for March soybeans is pushing and closing prices above solid technical resistance at the December high of US$10.84. The next downside price objective is pushing and closing prices below major psychological support at US$10.00.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled lower Friday, extending Thursday's fall, after funds left the market amid expectations of a downward correction. The September 2010 soybean contract settled RMB90, or 2.2%, lower at RMB4,000 a metric tonne.

 

Cash soybean prices in China's major producing areas were mostly stable following the New Year holiday, supported by government purchases.

 

Meanwhile, China's soybean imports in December are likely to have reached an all-time high above 5 million metric tonnes, according to a report by the Ministry of Commerce Friday. The country imported 3.3 million tonnes of soybeans in December 2008.

 

Crude palm oil futures on Malaysia's derivatives exchange fell for the second consecutive day in choppy trade Friday as weaker crude oil prices dragged other commodities lower. The March contract on the Bursa Malaysia Derivatives ended MYR4 lower at MYR2,626 a metric tonne.