January 9, 2007

 

CBOT Soy Outlook on Tuesday: Down 7-10 cents on e-CBOT, index fund length

 

 

Soybean futures on the Chicago Board of Trade are seen starting Tuesday's day session on weaker footing, in step with overnight declines, as larger than expected index fund length sends bearish signals through the market place.

 

Soybean futures are called to open 7 to 10 cents lower.

 

In e-CBOT trade, January soybeans were 8 cents lower at US$6.57 and March was 7 1/4 cents lower at US$6.70 per bushel.

 

The index fund length in the market will be the focus of the trade in early action, with a quiet news front, non-threatening South American weather and technical weakness combining to weigh on prices, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

The same fundamentals are in place, so it will depend on who shows up to buy to determine the extinct of the early losses, a CBOT floor analyst said.

 

The market reacted negatively to the index fund position in the market, but it was not a big surprise that the index funds held large longs, the only thing is we now have a number to place on the position, Roose added.

 

Meanwhile, trade positioning ahead of Friday's crop reports, recent technical activity and general weakness in commodities will remain features as market bulls have gotten off on the wrong foot to start the New Year, a CBOT trader said.

 

The Commodity Futures Trading Commission on Monday reported in its supplemental commitment of traders report that index funds were reported to hold net long positions totaling 129,727 combined soybean futures and options contracts as of Jan. 3. The index fund length represents 26.6% of soybean open interest. Traditional large speculative traders were net long 47,071 contracts. Index funds are net long combined soyoil futures and options positions to the tune of 67,869 contracts, comprising 23.9% of open interest. Speculative funds were reported net long 43,414 lots. Large speculative traders were reported net long combined futures and options positions in soymeal by 12,311 lots, compared with net longs of 11,840 contracts last week.

 

A market technician said there is now the specter of a bearish head-and-shoulders top reversal pattern forming on the daily bar chart following recent price action in March soybeans. The next upside price objective is to close prices above solid resistance at US$7.00 a bushel. The next downside price objective is closing prices below solid support at the December low of US$6.57 1/2.

 

First resistance for January soybeans is seen at Monday's high of US$6.81 1/2 and then at US$6.85. First support is seen at Monday's low of US$6.74 1/2 and then at US$6.70.

 

The DTN Meteorlogix weather forecast said scattered thundershowers are possible Wednesday night into Thursday in Argentine crop areas, but in general it appears to be a drier weather pattern for this region. In Brazil, no crop concerns are presented at this time. Isolated thundershowers in the north are on tap for Tuesday and Wednesday, with a chance for scattered showers and possible thundershowers Thursday. Temperatures will average near to above normal during this period, Meteorlogix reports.

 

In deliveries, a total of 148 delivery notices were posted against January soybeans. The last trade date assigned was Jan. 4. 153 delivery notices were posted against the January soyoil futures. The house account at Term Commodities was the primary stopper of 128 lots. The last trade date assigned was Jan. 4. Soymeal delivery notices totaled 129 lots, with the house account at Bunge Chicago stopping 107 lots. The last trade date assigned was Jan. 3.

 

Rotterdam soybeans and soymeal were mostly lower. European vegoils were mostly lower.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Tuesday on losses in CBOT soybean futures Monday. The May 2007 contract settled RMB8 lower at RMB2,824 a metric tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended mixed Tuesday as the market failed to shake off pressure from weaker global commodities and bearish technical charts. The March CPO contract ended at MYR1,890 a metric tonne, up MYR6 from Monday.