January 26, 2010

 

CBOT Soy Outlook on Tuesday: Down 4-6 cents; China fears, South America crops

 

 

Chicago Board of Trade soybean futures are poised for a lower start to Tuesday's day session, extending the market's lower trend on fears of reduced China demand and bearish South American crop outlooks.

 

In overnight trade, March soybeans were 6 1/2 cents, or 0.69%, lower at US$9.34, and May soybeans were 6 1/2 cents, or 0.68%, lower at US$9.43.

 

News of China is imposing new restrictions on bank lending is raising fears of reduced demand from the nation, as the move is seen as an attempt to slow their economic growth and cool inflation, analysts said.

 

Worries associated with rising South American crop estimates are seen adding fundamental pressure to limit upside potential.

 

In the absence of fresh supportive export news, traders are expected to eye outside markets, with a firmer U.S. dollar and weakness in crude oil and metal futures lending pressure to prices, analysts said.

 

Otherwise, technical factors will come into play, as traders weigh the risk of pressing prices that are already down sharply in recent weeks amid concerns about oversold conditions.

 

A technical analyst said the next downside price objective for March soybeans is pushing and closing prices below major psychological support at US$9.00. The next upside technical objective is pushing and closing March prices above solid technical resistance at last week's high of US$9.84.

 

The DTN Meteorlogix weather forecast said Brazil will continue to experience favorable conditions for developing soybeans throughout the major growing areas, with no significant heat or dryness indicated.

 

In Argentina, hot or very hot temperatures continue through Friday with little chance of significant rainfall. Crops will encounter some stress as highs reach well into the 90s Fahrenheit and possibly the low 100s F. However, the conditions during this weekend and next week do not look as severe, as there is at least some chance of showers and less hot weather, Meteorlogix said.

 

In other news, the Brazilian Vegetable Oils Industry Association, or Abiove, Tuesday lifted its soybean crop estimate to 65.2 million metric tonnes for the upcoming 2009-10 crop. Abiove's previous estimate on Dec. 3 pegged the 2009-10 soybean crop at 63.4 million tonnes. The 2008-09 crop produced 57.2 million tonnes.

 

In overseas markets, soybean futures edged lower on the Dalian Commodity Exchange Tuesday, weighed by losses on CBOT, weather concerns in South America and seasonally weak demand. The September soybean contract settled down marginally at RMB3,904 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange Tuesday ended at the lowest level since Nov. 20 as investors took profits amid worries over China's possible limits on bank lending and selling pressure in commodity markets, trade participants said. The April CPO contract on the Bursa Malaysia Derivatives ended MYR62 or 2.5% lower at MYR2,407 a metric tonne.