January 22, 2008

 

CBOT Soy Outlook on Tuesday: Sharply lower; global market weakness

 

 

Chicago Board of Trade soybean futures are seen starting the holiday shortened trading week sharply lower on broad based weakness in global markets amid an overnight collapse in U.S. and world equity markets, analysts said.

 

CBOT soybean futures are called to start the session 30 to 40 cents lower.

 

In overnight e-CBOT trading, March soybeans were 39 cents lower at US$12.25, July soybeans were 38 cents lower at US$12.59 1/2, and November soybeans were 32 1/4 cents lower at US$12.23.

 

The sharp slide in world markets should lead futures lower, but a 75 basis point cut in the Federal Reserve's discount rates is seen taking some of the sting out of global recession fears, analysts said.

 

"The Fed's rate cut should provide some stability under grains and oilseed markets, but I still anticipate a sharply lower opening," said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

Overall, the confidence level in the market is not high enough to offset the overnight weakness as the jury is still out on whether the Fed's actions would change the world situation, he added.

 

Meanwhile, technical weakness, weekend rains in South America and the market attempting to catch up with other markets after an extended holiday weekend is expected to add pressure to pin futures in negative territory in early action, analysts added.

 

A technical analyst said the "February Break" seasonal price downturn phenomenon appears to be at hand. Market bears have some fresh downside technical momentum on their side. The next downside price objective for March soybeans is pushing prices below psychological support at US$12.00.

 

First resistance for March soybeans is seen at US$12.45 and then at US$12.50. First support is seen at the overnight low of US$12.14 and then at US$12.00.

 

The DTN Meteorlogix Weather Service said moisture stress continues for developing corn, soybeans and sunflowers in the major growing areas of Argentina. Some shower activity is possible in western growing areas Tuesday and again later this week and during this weekend, Meteorlogix said.

 

In Brazil, heavier than expected rains through important soybean areas of Rio Grande Do Sul during the weekend will maintain favorable conditions for the developing crop. However, the five-day period continues drier and somewhat hotter than normal. Favorable conditions continue across Parana and the Mato Grosso, Meteorlogix reported.

 

Commodity Futures Trading Commission on Friday reported in its supplemental commitment of traders report that index funds held net long positions totaling 176,461 combined CBOT soybean futures and options contracts as of Jan. 15, down from 187,368 the prior week. Traditional large speculative traders were net long 114,406 contracts compared with net longs of 116,086 in the previous week. Commercials held net short combined futures and options positions totaling 263,347 contracts, up from the previous week's 274,157 contracts.

 

On tap for Tuesday, U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 11:00 a.m. EST.

 

In other news, Brazil's 2007-08 soy crop is developing without any major problems up to mid-January, with low incidences of Asian soybean rust and other crop destroying pests, farm consultancy Celeres said Monday.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange tumbled Tuesday on global concerns over the U.S. subprime crisis. The benchmark September 2008 soybean contract settled RMB134 lower at RMB4,571 a metric tonne, down 2.8%.

 

Crude palm oil futures on Malaysia's derivatives exchange fell heavily Tuesday, driven by losses in crude oil and soyoil futures, a slowdown in Malaysian exports and weaker equities markets. The benchmark April contract is now MYR305 off the all-time high of MYR3,420/tonne set Jan. 14.