February 6, 2007

 

CBOT Soy Outlook on Tuesday: 1-2 cents higher on overnight, technical strength

 

 

Carryover buying from firmer overnight trade and technical strength are expected to push Chicago Board of Trade soybean futures to a firmer start Tuesday, sources said.

 

Soybean futures are called to open 1 to 2 cents higher per bushel.

 

In e-cbot trade, March soybeans gained 1 1/2 cents to US$7.41 1/2.

 

There was little fresh news out to feed the bulls, although soybeans have technical strength after setting new contract highs in the past two trading sessions, sources said.

 

Indeed, one could argue that soybean bulls have taken over leadership of the grains complex from corn, possibly because of expectations that high corn prices will lead to a sharp reduction in the number of U.S. soybean acres planted this spring, a technical analyst said.

 

Soybean bulls have "solid upside momentum on their side and have gained fresh power recently," the analyst added.

 

The next major upside price objective for the bulls is to close March prices above solid chart resistance at the 2005 high of US$7.52 1/4. The next downside price objective for the bears is closing prices below solid support at US$7.00.

 

First resistance for January soybeans is seen at Monday's contract high of US$7.44 1/2 and then at US$7.52 1/4. First support is seen at Monday's low of US$7.35 and then at US$7.30.

 

Looking ahead for the week, the U.S. Department of Agriculture on Thursday is set to release weekly export sales data. On Friday, the USDA is slated to issue a supply/demand report, including new estimates for soybean ending stocks.

 

On the weather watch, DTN Meteorlogix predicts dry and warm-to-hot weather will continues to stress Argentine crops in La Pampa and southern Buenos Aires. Long-range charts suggest a chance for thunderstorms during Monday into Tuesday, but the likelihood is somewhat uncertain, the weather firm reported.

 

In Brazil, there are no significant crop concerns at this time, except for the possibility of more than average soybean rust, Meteorlogix said. Dry weather also should be watched through the country's far southern areas, the firm noted.

 

Brazil's soy crop will likely be at least 80% genetically-modified by 2010, according to the country's top crop science institute, Embrapa. Farmers are turning to transgenic soy because they say it helps control weeds, ultimately lowering costs for herbicides, Embrapa said.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled mostly lower Tuesday on a technical correction. The fall, however, was expected to be brief amid concerns that soybeans will lose out on millions of acres in the U.S., a source said.

 

The sluggish demand from the animal breeding industry also has put pressure on Dalian futures prices, analysts said. Chinese farmers have been reluctant to increase their livestock due to concerns over disease outbreaks, including bird flu, sources noted.

 

Corn and soymeal, produced from the crushing of soybeans, can be used as animal food.

 

Crude palm oil futures on the Bursa Malaysia Derivatives, meanwhile, ended sharply lower Tuesday as participants took profits from the market's recent rally amid renewed concerns about poor demand, sources said. A strong Malaysian ringgit added to the downward pressure on the market.