January 18, 2007

 

CBOT Soy Outlook on Thursday: Firmer on overnight trade, corn rally

 

 

A firmer start is expected Thursday for soybean futures at the Chicago Board of Trade Thursday, on overnight strength and ideas corn will be strong again.

 

Most-active March is called to open 6 to 8 cents firmer.

 

In e-cbot trade, March corn gained 7 1/2 cents to US$7.29 1/2 a bushel.

 

Corn futures were strong again in overnight trade following a rally Wednesday and that should give soybeans footing in Thursday's session. Soybeans are in a race for spring acreage with corn. Corn futures are rallying sharply in a bid to lure land to plant the grain and most of that acreage will likely come from soybeans.

 

"It's all about corn. Corn is the leader. Soybeans do have to try and keep up, which is the reason why it's firmer. There's no real news out," a veteran grain trader said.

 

Several grain sources said it's believed the commodity index rebalancing which started in the beginning of the year is through and that could be supportive. Since grains rallied sharply in 2006, index fund investors sold their grain positions to rebalance. Now that is finished, analysts said, bulls might feel one shackle released. "With that selling done, the markets can go higher," the grain trader said.

 

A technical analyst said Thursday's soybean rally to new contract highs was positive for bulls. The next upside price objective for the soybean bulls is a close over the 2005 high of US$7.52 1/4. The next downside price objective for the bears is a close below US$7.00.

 

Weekly export sales data from the U.S. Department of Agriculture were delayed from their usual Thursday release due to the Martin Luther King Jr holiday Monday. Sales data are expected Friday.

 

Private weather firm DTN Meteorologix said there are concerns that the persistent wetness in the northern soybean areas could lead to increased soybean rust issues in the coming weeks, but mainly favorable conditions are seen in the southern belt.

 

In Rio Grande do Sul and Parana, skies are forecast to be dry or with only a few light showers during Thursday, with a chance for scattered showers and thundershowers, 0.25-1.00 inch and locally heavier, during Friday and Saturday. Temperatures are seen averaging near to below normal during this period. The weekend could bring a chance for showers in Parana and fair through Rio Grande do Sul, with temperatures near to below normal.

 

In the center-west regions of Mato Grosso and Mat Grosso do Sul, there's a chance for scattered to widely scattered light showers with locally heavier rains during Thursday through Saturday, with temperatures near to above normal. This continues into the weekend.

 

Argentina's soybean growing regions are dry and hot Thursday, but there's a chance for rain Thursday evening into Friday, with cooler temperatures but it turns dry and hot again Saturday.

 

"The weather overall is good in South America and that is a little bearish," another grain analyst said.

 

In China, soybean futures traded on the Dalian Commodity Exchange rose, but lagged gains on the CBOT. The most-active September contract gained RMB26 to RMB3,124 a metric tonne.

 

Traders there said Dalian prices were subdued due to ahead of the central government's financial working conference. Among the discussions will be a review of the value of the yuan and economists expect China to allow the yuan to appreciate more rapidly. That will make foreign-currency denominated imports cheaper.

 

Crude palm oil futures on the Bursa Malaysia Derivatives were mixed. April rose MYR2 to MYR1,905 a metric tonne.

 

Rotterdam soybean and soymeal prices were firmer, while European vegoils were mostly down.