January 23, 2009

Soybean futures on the Chicago Board of Trade are expected to start Friday's day session lower, following the overnight theme, with potential weekend rain in Argentina and outside market weakness applying pressure.

 

CBOT soybean futures are called 5 cents to 7 cents lower.

 

In overnight electronic trading, March soybeans finished 7 1/2 cents lower at US$10.04 1/2. March soymeal was US$3.20 lower at US$315.00 per short tonne, while March soyoil ended 18 points lower at 33.35 cents per pound.

 

Private forecasts calling for good chances of rain showers to move through Argentina on Sunday, coupled with strength in the U.S. dollar and a weak early tone in crude oil set the stage for a lower start, analysts said.

 

However, the uncertainty of the Argentine weather forecasts will produce tentative trade, with market participants watching midday weather updates for direction heading into the weekend, a CBOT floor analyst said.

 

Supportive weekly export sales and a fresh sale of U.S. soybeans announced to China is seen providing underlying support to limit losses, with upside movement seen only with a reduction in rain potential in Argentina.

 

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 Thursday's high of US$10.34 3/4. First support is seen at US$10.00 and then at Thursday's low of US$9.96 1/4.

 

The U.S. Department of Agriculture reported total weekly soybean export sales were a net 1,329,000 metric tonnes for the week ended Jan. 15. Sales for 2008-09 were a net 1,324,800 metric tonnes. Analysts had forecast sales between 600,000 and 1,000,000 metric tonnes. The primary buyer was China with 765,700 metric tonnes. USDA reported 1,017,400 metric tonnes of soybeans were shipped in the same period.

 

Soymeal sales were a net 210,800 tonnes, above trade estimates ranging from 75,000 to 125,000 tonnes. Soyoil commitments were 7,500 metric tonnes. Analysts had forecast sales between zero and 10,000 tonnes.

 

USDA also announced private exporters reported the sale of 145,000 metric tonnes of soybeans to China for delivery in the 2008-09 marketing year.

 

The DTN Meteorlogix weather outlook said very hot, dry weather continues to stress developing crops in Argentina. "We still see a cold front passage during Sunday and Monday, producing scattered thunderstorm activity associated with this cold front passage," Meteorlogix said. However, this may not be enough to significantly change the situation in the primary corn, soybean and sunflower belts.

 

Meanwhile, with a brutal drought baking Argentina's developing soy and corn crops, yields and total production are likely to fall very sharply, the Buenos Aires Cereals Exchange said in a notice Friday.

 

Soy production is seen falling between 17% and 25% from last season, the exchange said. That would mean production of just 34.5 million to 38.2 million tonnes. USDA is expecting Argentina to grow 49.5 million tonnes this season.

 

In overseas markets, soybean futures fell slightly on the Dalian Commodity Exchange Friday on thin trade, tracking counterparts' decline on CBOT as the market turned again to concerns over the shaky global macroeconomic outlook. The benchmark September 2009 soybean contract lost 0.1% to settle at RMB3,387 a metric tonne.

 

Cash soybean prices in China's major producing areas stayed flat in the week to Friday on relatively stable demand, with soyoil and soymeal prices falling amid the remnants of bird flu concerns.

 

Crude palm oil futures on Malaysia's derivatives exchange ended 2.1% lower Friday on profit-taking, long liquidation and weakness in soyoil, trade participants said. The benchmark April contract on Bursa Malaysia Derivatives ended MYR40 lower at MYR1,830 a metric tonne.