February 4, 2010

 

CBOT Soy Outlook on Thursday: Up 2-4 cents; bounce on oversold conditions

 

 

Soybean futures at the Chicago Board of Trade are poised for a higher start to Thursday's day session, following the overnight theme in a mild correction from Wednesday's losses.

 

Soybeans are seen opening 2 to 4 cents higher.

 

In overnight trade, March soybeans were 5 1/2 cents, or 0.61%, higher at US$9.13 1/2, and May soybeans were 5 cents, or 0.54%, higher at US$9.24.

 

Traders are anticipating a modest price bounce on sentiment that Wednesday's declines were overdone, with participants looking to cover some short positions heading toward Tuesday's supply and demand report, analysts said.

 

The market is expected to garner support from the Environmental Protection Agency's announcement on mandates for biofuel as well. The mandate for biodiesel is seen as favorable for soyoil used for biodiesel and should lead to strength in soyoil product value share.

 

March oil share ended at 40.88% Wednesday and was quoted at 40.92% overnight.

 

However, a firmer U.S. dollar index, weakness in crude oil, metal and equity futures is seen providing a bearish influence to limit upside potential. Lower-than-expected weekly export sales are seen as another bearish feature for the market to digest.

 

A technical analyst said "serious technical damage has been inflicted in soybeans recently, with prices in a four-week-old 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.

 

U.S. Department of Agriculture reported total weekly soybean export sales were a net 384,600 metric tonnes for the week ended Jan. 28, with 381,500 tonnes sold for delivery in the 2009-10 marketing year. The primary buyer was China at 262,500 metric tonnes. Analysts had forecast sales between 600,000 and 800,000 metric tonnes.

 

USDA reported 1,275,000 metric tonnes were shipped in the week ended Jan. 28, down 9% from the previous week and down 11% from the prior four-week average. The primary destination was China with 865,500 metric tonnes.

 

Soymeal sales were a net 135,000 tonnes. Trade estimates ranged from 100,000 to 300,000 tonnes. Soyoil commitments were 58,800 metric tonnes. Analysts had forecast sales between 10,000 and 20,000 tonnes.

 

The EPA declared Wednesday that soybean-based biodiesel will qualify for production mandates under the renewable fuel standard, a decision welcomed by the troubled biodiesel industry. EPA said that some 12.95 billion gallons of biofuels will have to be added this year, as required by law. Some 6.5 million gallons must come from cellulosic ethanol. And 1.15 billion gallons must come from biomass-based diesel.

 

The mandate is especially important to the biodiesel industry now that producers have lost a US$1-per-gallon government tax incentive that expired on Dec. 31.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Thursday, giving back Wednesday's gains after losses on CBOT Wednesday. The September 2010 soybean contract settled down RMB25, or 0.7%, at RMB3,742 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange climbed Thursday for a third consecutive day to their highest levels in more than two weeks as investors continued to cover short positions in anticipation of a fall in output and inventories. The April CPO contract on the Bursa Malaysia Derivatives ended up MYR12, or 0.5%, at MYR2,510 a metric tonne.