January 13, 2010

 

CBOT Soy Outlook on Wednesday: Lower; downturn continues on fundamentals

 

 

Carryover selling from Tuesday's sharp declines and bearish fundamental outlooks are seen weighing on Chicago Board of Trade soybean futures to start Wednesday's day session.

 

CBOT soybean futures are seen starting 3 cents to 5 cents lower. In overnight trade, January soybeans were 5 1/2 cents lower at US$9.64, and March soybeans were 2 1/4 cents lower at US$9.75 3/4.

 

The combination of a large U.S. crop coupled with record projected South American production headed to the world market provides a bearish backdrop to keep pressure on prices, said Don Roose, president U.S. Commodities.

 

The bottom line is there will be ample world supplies to cover end user needs and with concerns about waning Chinese demand, it will be tough to rally prices, he added.

 

China, the world's biggest soybean consumer, may have overbooked its early needs and might not be shopping any time soon. If that's the case both the U.S. and Brazil would suffer as global supplies would be ample. Further, a tighter monetary policy for the Asian nation, makes it more expensive for importers to buy.

 

Spillover weakness from an expected sharply lower start in corn futures is seen damping bullish enthusiasm as well.

 

Now that the market has gotten past the January crop report, it's possible soybean prices could continue to slide if the South American harvest is unimpeded and the U.S. export pace drops as expected, analysts said.

 

However, with futures prices already slipping 83 cents in the past week and the potential for end user and index fund buying to emerge during the session, downside risks maybe limited, a CBOT floor analyst said.

 

A technical analyst said the next upside technical objective for March soybeans is pushing and closing prices above major psychological resistance at US$10.00. The next downside price objective is pushing and closing prices below solid technical support at the November low of US$9.55 3/4.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Wednesday due to concerns that the central bank is likely to issue more tightening measures after raising the reserve requirement ratio for banks. The benchmark September 2010 soybean contract settled RMB87, or 2.2%, lower at RMB3,917 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended lower Wednesday due to concern that rising production and lower exports may drive stock levels to a new record high, trade participants said. The March contract on the Bursa Malaysia Derivatives ended MYR46 lower at MYR2,510 a metric tonne.