February 8, 2010

 

CBOT Soy Outlook on Monday: Up 10-13 cents, buoyed by pre-report short covering

 

 

Chicago Board of Trade soybean futures are seen starting Monday's day session with double digit gains, buoyed by speculative short-covering ahead of Tuesday's supply and demand reports.

 

CBOT soybeans are seen opening Monday's day session 10 cents to 13 cents higher.

 

In overnight trade, March soybeans were 13 1/2 cents or 1.48% higher at US$9.27, and May soybeans were 14 cents higher or 1.51% higher at US$9.38 1/4.

 

Traders are expected to cover some short positions in anticipation of a tighter U.S. soybean balance sheet in Tuesday's government reports, with higher export and crush estimates serving as a draw on soybean ending stocks, analysts said.

 

The closure of the U.S. federal government Monday because of a weekend storm means the weekly grain inspections data from the U.S. Department of Agriculture will be delayed. The data is normally released Monday at 11 a.m. EST.

 

USDA is scheduled to release its February supply and demand report Tuesday at 8:30 am EST. However, the government closure may possibly delay the supply/demand report as well. The average soybean ending stock estimate of the 18 analysts surveyed in a Dow Jones Newswires survey is 219 million bushels. USDA projected the carryout at 245 million in January.

 

The market is in the midst of a short covering bounce following a five-week downtrend. The alleviation of outside market pressure is seen aiding the higher tone, with a weaker U.S. dollar, and higher crude oil and metal futures lending support.

 

However, the market remains in a long term bearish fundamental trend, with favorable South American weather promoting robust crop potential for Brazil and Argentina.

 

Brazil and Argentina are the world's second and third largest producers of soybeans behind the United States.

 

Otherwise, traders will keep a close eye on movements in the U.S. dollar versus other currencies. The recent uptick in the greenback is seen as one of the key drivers of the big drop in grain and oilseed futures in the past month, a CBOT floor analyst said.

 

A technical analyst said the next downside price objective for March soybeans is pushing and closing prices below major psychological support at last week's low of US$9.00. The next upside technical objective is pushing and closing March prices above solid technical resistance at US$9.40.

 

The DTN Meteorlogix weather forecast said a period of dry, hot weather likely diminished soil moisture and increased stress to crops in Brazil. However, this pattern appears to be coming to an end during this week. The weather should be more favorable for soybeans and corn later this week and early next week, Meteorlogix said.

 

In Argentina, scattered weekend thunderstorms continue to build soil moisture and favor crops after the late January hot, dry spell, Meteorlogix said in the forecast.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Monday, along with the rise in outside markets. The September 2010 soybean contract settled RMB35, or 0.9%, higher at RMB3,812 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended up Monday rising as much as 1.75% to the highest level since Jan. 12 following fresh buying and short covering. The April CPO contract on the Bursa Malaysia Derivatives ended up MYR29, or 1.2%, at MYR2,550 a metric tonne.