January 22, 2009

Chicago Board of Trade soybean futures are expected to start Thursday's day session on firm footing, supported by Argentine crop issues and technical strength.

 

CBOT soybean futures are called 4 cents to 6 cents higher.

 

In overnight electronic trading, March soybeans finished 5 1/4 cents higher at US$10.25 3/4. March soymeal was 60 cents higher at US$321 per short tonne, while March soyoil ended 39 points higher at 34.34 cents per pound.

 

The market is poised for a higher start, mimicking the overnight theme, with the threat of production losses from drought-stricken Argentine crops serving as the catalyst for the higher tone, said Vic Lespinasse, an analyst with Grainanalyst.com

 

The charts have turned positive, and without any definitive influences in outside markets, Argentine production and weather will remain the primary focus of the market, Lespinasse added.

 

Underlying demand is a supportive feature, as well, but a shift in outside market direction and weather forecasts could attract profit taking to temper bullish enthusiasm.

 

A technical analyst said the next upside price objective for March soybeans is to push and close prices back above solid technical resistance at the January high of US$10.60 1/4 a bushel. The next downside price objective is pushing and closing prices below solid technical support at last week's low of US$9.57 3/4 a bushel.

 

First resistance for March soybeans is seen at US$10.25 and then at last week's high of US$10.37. First support is seen at US$10 and then at Wednesday's low of US$9.86 1/2.

 

The DTN Meteorlogix weather outlook said hot, dry weather continues to stress developing crops. A cold front passage is still on tap during Sunday but there are signs that the thunderstorm activity associated with this front will split with one package moving northward through Cordoba while another tracks eastward across northeast Buenos Aires. That means some may benefit from these rains while some areas will miss out, Meteorlogix said. In either case, hot, dry weather will return to the region by the middle of next week.

 

Meanwhile, dry weather conditions in soybean growing regions of Argentina may lead to significant crop losses and support global soymeal and vegetable oil prices, Hamburg-based industry analyst Siegfried Falk said.

 

Argentina's soybean production will fall to between 41 million and 42 million metric tonnes, 17% less than the current U.S. Department of Agriculture forecast for Argentina, and down 11% on the year, says Panagricola S.A. vice president Ricardo Baccarin. Severe drought is preventing late planting and cutting potential yields, Baccarin said.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled slightly lower Thursday, largely due to caution ahead of the Lunar New Year holiday, analysts said. The benchmark September 2009 soybean contract lost RMB4, or 0.1%, to settle at RMB3,391 per metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange rose 3.4% Thursday due to the bleak picture of the soybean crop in Argentina, a bullish forecast by a Hamburg-based analyst, short covering and on support from crude oil, traders said. The benchmark April contract on the Bursa Malaysia Derivatives ended MYR61 higher at MYR1,870/tonne.