February 10, 2009

Chicago Board of Trade soybean futures are expected to start Tuesday's day session on firm footing, buoyed by a supportive U.S. Department of Agriculture report.

 

CBOT soybean futures are called 10 cents to 15 cents higher.

 

The USDA's cut in South American production, particularly Argentina as well as the drop in world ending stocks, should serve as a supportive cause for soybean futures to start the session, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

The USDA took Argentina's crop down where the trade was expecting, but most thought the USDA would be more conservative in their downward revision, Scoville said.

 

USDA lowered Argentina soybean output 5.7 million tonnes to 43.8 million metric tonnes, as drought conditions and heat in the central growing area has resulted in lower projected harvested area and yields. Brazilian soybean production was trimmed 2 million tonnes to 57 million metric tonnes, due to dry conditions especially in the southern producing areas. Paraguay soybean production was reduced to 4 million tonnes, down 1.6 million, also due to hot, dry weather.

 

World ending stocks were lowered to 49.87 million metric tonnes, down from 53.94 million in January.

 

However, the trade can't get too excited about a South American crop revision that is where the market is already trading, placing increased focus on weather and demand for price direction, a CBOT floor analyst said.

 

Meanwhile, a tighter U.S. balance sheet is supportive, with higher crude oil futures aiding higher opening calls, traders said.

 

USDA estimated 2008-09 U.S. soybean ending stocks at 210 million bushels, down from its previous forecast of 225 million, but above the average of a Dow Jones Newswires survey of 203 million bushels.

 

U.S. soybean exports were raised 50 million bushels to 1.150 billion as export shipments continue to exceed earlier projections, primarily for China. Projected soybean crush was lowered 35 million bushels to 1.650 billion bushels, reflecting a continuation of the weak domestic soybean meal disappearance that began during the summer of 2008.

 

Soybean oil stocks are projected higher this month as reduced production is more than offset by lower use. Domestic soybean oil disappearance is reduced mainly due to lower projected use for biodiesel production. The soybean oil export projection is also reduced this month reflecting weak sales and shipments through the first four months of the marketing year.

 

A technical analyst said the next upside price objective for March soybeans is to push and close prices back above solid technical resistance at the January high of US$10.60 1/4 a bushel. The next downside price objective is pushing and closing prices below solid technical support at last week's low of US$9.34 1/2 a bushel.

 

First resistance for March soybeans is seen at Monday's high of US$10.19 and then at US$10.25. First support is seen at Monday's low of US$9.91 1/2 and then at US$9.76 3/4.

 

The DTN Meteorlogix weather forecast said showers are on tap for Argentina Tuesday, but the pattern looks to be drier and warmer to much warmer than normal after the system moves through. This is seen increasing stress to filling crops during this period.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange closed unchanged Tuesday as investors were cautious ahead of a key report to be issued by the U.S. Department of Agriculture later in the day. The benchmark September 2009 contract closed at RMB3,580/tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended up on expectations that a drought in soy-producing countries like Argentina and China would prompt increased buying of palm oil, a key substitute for soyoil, said trade participants Tuesday. The benchmark April contract on the Bursa Malaysia Derivatives ended MYR89 up at the intraday high of MYR1,969/tonne.