January 23, 2007

 

CBOT Soy Outlook on Tuesday: Up 6-8 cents on e-CBOT, ahead of bush address

 

 

Chicago Board of Trade soybean futures are expected to start Tuesday's day session higher after firmer activity overnight and ahead of President Bush's State of the Union address, sources said.

 

Soybean futures are called to open 6 to 8 cents higher.

 

In e-cbot trade, March soybeans were 8 cents up at US$7.25 1/4.

 

Follow-through buying is expected as the market is ready to move higher after recent profit-taking "shook things up," a floor source said.

 

Soybean futures ended mixed and little changed Monday, a sign that the market has been "pausing" after March soybeans hit a fresh contract high last week, a technical analyst added.

 

"This pause is not bearish," he said. "Bulls are still in firm technical control and looking for more on the upside in the near term."

 

Soybeans, however, will still likely be a follower of corn for the near term, the analyst said.

 

Both markets may feel some support during the day session as traders look ahead to President Bush's State of the Union address, sources said. Bush is expected to discuss the importance of ethanol and alternative fuels, which could spark a bullish rally in corn and soybeans, traders noted.

 

The State of the Union is scheduled to begin Tuesday at 9 p.m. EST.

 

"We should feel some boost if (Bush) talks up the alternative fuels," a trader said.

 

The next upside price objective for the soybean bulls is to close March soybean prices above solid longer-term resistance at the 2005 high of US$7.52 1/4, basis nearby futures, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$7.00.

 

First resistance for March soybeans is seen at Monday's high of US$7.23 1/2 and then at the contract high of US$7.28 1/2. First support is seen at Monday's low of US$7.11 1/2 and then at US$7.06.

 

Looking at the weather, conditions remain wet in South America, which is bearish for prices, a floor broker said.

 

The DTN Meteorlogix weather firm reported "mainly favorable Conditions" in Brazilian soybean areas, but noted there are concerns that persistent wetness could lead to increased soybean rust issues.

 

In Argentina, scattered thundershowers occurred again overnight in the drier areas of La Pampa and western Buenos Aires, Meteorlogix said. This should help to ease stress to crops after recent hot and dry weather, the firm noted.

 

Argentina will produce a record 43 million metric tonnes of soybeans from the 2006-07 crop, according to an Agriculture Secretariat official.

 

Although the estimates are tentative, based on the area planted and current climate conditions, Argentina will produce a record 89.5 million tonnes of grains and oilseeds this year, the official said.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Tuesday on bargain-hunting after recent falls. Soybean futures had declined the previous two days, but traders expect the market to maintain upward momentum in the long term.

 

"Global soybean-growing areas will be reduced as corn is more popular due to increasing demand for corn-based ethanol," one analyst said.

 

Crude palm oil futures, meanwhile, ended a tad lower Tuesday on the Bursa Malaysia Derivatives after yet another choppy, trading day as market participants continued to weigh a spate of both bullish and bearish factors. The market fluctuated between positive and negative territory throughout the day, failing to establish any decisive trend.