January 9, 2009

 

CBOT Soy Outlook on Friday: Seen up on South American weather issues

 

 

Soybean futures on the Chicago Board of Trade are expected to start Friday's day session higher, underpinned by weather issues for South American soy crops.

 

CBOT soybean futures are called 20 cents to 25 cents higher.

 

In overnight electronic trading, March soybeans finished 27 1/2 cents higher at US$10.17. March soymeal was US$8.80 higher at US$307.10 per short tonne, while March soyoil ended 32 points higher at 36.10 cents per pound.

 

South American weather is the dominant feature that will impact price action in early trade, with private forecasters taking moisture out of near and longer term outlooks for hot/dry areas of Argentina and Brazil, said Vic Lespinasse, analyst with Grainsanalyst.com.

 

With a tight projected U.S. soybean ending stock projection, there is little room for error in South American production, particularly with protein demand from China robust, analysts said.

 

Technical and psychological price support will aide the advances, with bullish traders encouraged by the market's ability to climb back above the US$10.00 level overnight, Lespinasse added.

 

However, traders said there is potential for two-sided action once again, as overbought conditions, pre crop report positioning and index fund rebalancing opens the door for price pressure.

 

A market technician said the next upside price objective for March soybeans is to push and close prices above solid technical resistance at US$10.50 a bushel. The next downside price objective is pushing and closing prices below solid technical support at last week's low of US$9.36 a bushel.

 

First resistance for March soybeans is seen at Thursday's high of US$10.04 3/4 and then at this week's high of US$10.23. First support is seen at Thursday's low of US$9.76 1/4 and then at US$9.50.

 

The DTN Meteorlogix weather outlook took rain out of the forecast for Argentina during the early next week time frame. Increased risk for more hot weather during the short and long range periods is forecast as well. This appears to be a more threatening forecast for reproductive crops in the area.

 

In Brazil, hot, dry weather for Parana and Mato Grosso do Sul Friday and Saturday will continue to stress developing crops. Rainfall is possible in this area later this weekend or during next week. This rain will be needed to prevent significant stress from occurring on these crops, Meteorlogix forecasts.

 

In deliveries, January soybean deliveries totaled 19 lots. The house account at ADM Investor Services stopped all 19 lots. The last trade date assigned was Jan. 5.

 

January soyoil deliveries totaled 554 lots. Issuers and stoppers were scattered among various commission houses. The last trade date assigned was Jan. 7.

 

In overseas markets, soybean futures settled higher Friday on the Dalian Commodity Exchange, tracking Chicago's bounce as traders were reassured of firmer demand based on dry weather in South America. The benchmark September 2009 soybean contract gained 3% to settle at RMB3,384 a metric tonne.

 

Cash soybean prices in China's major producing areas inched up in the week ended Friday, with soybean oil and soybean meal showing sharper rises ahead of the Lunar New Year holiday.

 

Crude palm oil futures on Malaysia's derivatives exchange rose almost 4.5% but ended off their highs Friday on expectations that exports will be 40% lower on month during the Jan. 1-10 period, said trade participants. The benchmark March contract on Bursa Malaysia Derivatives ended MYR55 higher at MYR1,920/tonne, off an intraday high of MYR1,948.