February 1, 2010

 

CBOT Soy Outlook on Monday: Flat-down 1 cent; consolidating with bearish tone

 

 

Soybean futures at the Chicago Board of Trade are seen starting Monday's day session with a steady to lower undertone, consolidating in the absence of fresh fundamental news to direct prices.

 

In overnight trade, March soybeans were 1 cent or 0.11% lower at US$9.13, and May soybeans were 1/2 cent higher or 0.05% higher at US$9.25 1/4.

 

The lack of fresh fundamental news has futures looking for direction, but bearish near term supply and demand outlooks are expected to keep pressure on prices.

 

Growing global supplies with a record South America harvest nearing coupled with decreasing demand, as China starts to shift attention to plentiful Brazil and Argentina crops is expected to limit upside potential, said Victor Lespinasse, analyst with Grainanalyst.com.

 

The market is overdue for a correction following a US$1.34 1/2 drop in prices in January basis the March contract, but without supportive fundamentals buyers remain in a cautious mode, he added.

 

However, traders say there is potential for light short covering to emerge amid a weaker U.S. dollar and firmer crude oil and metal futures in early action.

 

A weaker dollar is often seen as supportive because it makes U.S. commodities more attractive to foreign buyers.

 

Nevertheless, without a tightening of supply or an improvement in demand traders remain encouraged to sell rallies, analysts added.

 

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 US$9.50.

 

The DTN Meteorlogix weather forecast said a period of drier/hotter weather is likely this week in Brazil, especially over Mato Grasso do Sul and Parana but possibly over Rio Grande do Sul as well. The outlook for next week shows a ridge weakening somewhat, and this may allow rains to return to Rio Grande do Sul.

 

A developing ridge over Brazil this week likely means the Argentina region will turn wetter, Meteorlogix said. Cold fronts moving in off the Pacific tend to slow down and in some cases stall out over Argentina in response to ridging over southern Brazil. This means improving conditions for crops, after last week's dry/very hot weather, Meteorlogix added.

 

U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 11 a.m. EST.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Monday, plagued by the strong dollar and widespread losses in financial markets. The September 2010 soybean contract settled RMB73, or 1.9%, lower at RMB3,795 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives Exchange were closed Monday for a public holiday.