February 2, 2010

 

CBOT Soy Outlook on Tuesday: Up 3-5 cents; oversold conditions, outside markets

 

 

Oversold conditions and supportive outside market influences are expected to lift Chicago Board of Trade soybean futures to start Tuesday's day session.

 

In overnight trade, March soybeans were 4 3/4 cents, or 0.52%, higher at US$9.14 1/2, and May soybeans were 5 cents higher, or 0.54% higher, at US$9.25 3/4.

 

The market is poised to follow through on overnight price strength, buoyed by speculative short covering and end user buying following a month-long slide in prices to 4-month lows, analysts said.

 

"Each passing day the market retreats it becomes more and more overdue for a technical bounce," a CBOT floor analyst said.

 

A weaker U.S. dollar coupled with higher crude oil and metal futures are seen lending support to prices as well.

 

However, traders will keep a close eye out for any sign of upside exhaustion, as a bearish technical trend, rising global supplies, and sparse fresh export demand keep pressure on prices.

 

The market has had trouble sustaining any upside moves in the past month, and without any overtly bullish news, traders have yet to be convinced that a higher start to the session is more than a "bubble in a bear market," a CBOT floor analyst said.

 

A technical analyst said serious technical damage has been inflicted in soybeans recently. Prices are in a steep four-week downtrend on the daily bar chart. 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, he said.

 

The DTN Meteorlogix weather forecast said an upper level ridge is expected to build westward and southward over Brazil during the next few days. This means a period of drier, hotter weather is likely during the next 6 days. The outlook for early next week shows the ridge weakening somewhat. This may allow scattered showers to redevelop in key crop areas, Meteorlogix said.

 

In Argentina, the developing ridge over Brazil this week likely means the Argentina region will turn wetter. 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 said.

 

Meanwhile, Brazilian farmers have harvested 5% of the upcoming 2009-10 soy crop as of Jan. 29, local agricultural consultancy Celeres said in a report this week. Brazil's soy harvest remains ahead of a five-year average of 2% of soybeans harvested at this time of year, Celeres said.

 

In overseas markets, soybean futures fell on the Dalian Commodity Exchange Tuesday as sellers shifted their attention to bearish fundamentals amid a lack of fresh supportive news. The September soybean contract settled RMB40, or 1.1%, lower at RMB3,755 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended higher in thin, range bound trade Tuesday, supported by higher soyoil futures in after-hours trade, said trade participants. The April CPO contract on the Bursa Malaysia Derivatives ended up MYR7 at MYR2,452 a metric tonne.