January 20, 2010

 

CBOT Soy Outlook on Wednesday: Lower; broad based weakness, dollar strength

 

 

Soybean futures at the Chicago Board of Trade are poised for a lower start to Wednesday's day session, as a sharply higher U.S. dollar promotes broad based weakness across the commodity sector.

 

In overnight trade, March soybeans were 7 cents lower at US$9.56 1/2, and May soybeans were 7 cents lower at US$9.63 1/4.

 

The U.S. dollar is promoting the defensive tone, with record South American production potential and fears of declining Chinese demand amid news of a tighter monetary policy for the Asian nation Wednesday aiding the bearish theme, said Victor Lespinasse, analyst with Grainanalyst.com.

 

Local Chinese media Wednesday cited unnamed sources as saying that banks had been told to stop new loans, lending weight to recent indications that China was moving to further tighten lending growth.

 

Meanwhile, Bank of China Ltd. has ordered its credit officials to halt any new yuan loans due to excessive lending growth so far in January, and also curb foreign-currency denominated new loans, a person familiar with the matter told Dow Jones Newswires.

 

Otherwise, traders will eye outside markets for clues to direction, with technical factors key as participants remain concerns of selling pressure continuing as prices penetrate underlying chart levels.

 

A market technician said serious technical damage has been inflicted recently. Price action Tuesday could be the beginning of a downside "breakout" from a bearish pennant pattern on the daily bar chart.

 

First resistance for March soybeans is seen at US$9.75 and then at Tuesday's high of US$9.84. First support is seen at US$9.55 3/4.

 

The T-storm Weather forecast said dryness without sustained heat is on tap for Argentina, Paraguay, and South Brazil through the next 10 days. Argentina through South Brazil is favorably moist and rain in around 10 days will benefit crops. However, 20% of Brazil's soybeans are experiencing short-term dryness, but rain through next week will improve soil moisture for crops in the driest areas of Brazil, T-storm Weather said.

 

In other news, a Thai importing company has purchased 270,000 metric tonnes of South American soymeal for January-September shipment, a person involved in the deal said Wednesday. Around 30,000 tonnes will be delivered each month, the executive said on the sidelines of the World Grains Trade Summit in Singapore. He said Thailand imports more than 100,000 tonnes of soymeal in general each month.

 

In overseas markets, soybean futures fell on the Dalian Commodity Exchange Wednesday, along with sagging markets across asset classes amid talk that Chinese banks have been told to halt new yuan loans. The September soybean contract settled 1% lower at RMB3,881 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended lower Wednesday as exports rose, but not enough to offset expectations of a big global soybean crop and lower crude oil prices, trade participants said. The April CPO contract on the Bursa Malaysia Derivatives ended MYR46, or 1.8% lower, at MYR2,444 a metric tonne.