February 19, 2008

 

CBOT Soy Outlook on Tuesday: Up on outside influences; demand outlooks

 

 

Soybean futures on the Chicago Board of Trade are expected to start Tuesday's day session sharply higher, continuing the overnight session's run to new all-time highs as bullish outside influences and strong demand outlooks underpin prices.

 

CBOT soybean futures are called to start the session 20 to 25 cents higher.

 

CBOT futures set new contract and all-time highs in overnight trade.

 

In overnight e-CBOT trading, March soybeans were 24 3/4 cents higher at US$13.98 1/2, May soybeans were 24 3/4 cents higher at US$14.16, July soybeans were 25 cents higher at US$14.27 1/2, and November soybeans were 19 3/4 cents higher at US$13.37 1/4.

 

New highs scored overnight combined with the influence of higher outside energy and metal markets as well as lingering concerns of increased demand from China are supportive factors for prices, said Jason Roose, analyst with U.S. Commodities in West Des Moines, Iowa.

 

Soybean prices have soared in the past week, largely on news that an estimated 40% of China's rapeseed crop has been damaged in recent snow storms, which could lead the world's largest soybean importer to buy more soybeans and soyoil from overseas markets, analysts said.

 

Bullish technical momentum is seen keeping prices in a strong uptrend, but with traders looking to pick a top, any sign of buying exhaustion will attract profit taking to temper upside moves, traders added.

 

A technical analyst said the next upside price objective for July soybeans is to push and close prices above solid resistance at the contract high of US$14.12 1/2 a bushel. The next downside price objective is pushing and closing prices below solid technical support at US$13.60, which would fill on the downside a big upside price gap on the daily bar chart.

 

First resistance for July soybeans is seen at Friday's contract high of US$14.12 1/2 and then at US$14.25. First support is seen at US$14.00 and then at Friday's low of US$13.86 1/2.

 

The DTN Meteorlogix Weather Service said the recent weather pattern in Brazil has been more favorable for the harvest in the north and for filling soybeans in the south. Filling soybeans will continue to benefit from periodic rains. The harvest may slow, at times, due to increasing shower activity in central and northern areas, Meteorlogix said.

 

In Argentina, periodic thundershower activity and only brief hot spells likely means mostly favorable conditions for filling crops, Meteorlogix added.

 

Index funds raised their net long CBOT soybean futures and options positions combined, which now total 192,657 contracts as of Feb. 12, up from 190,991 the prior week, according to Commodity Futures Trading Commission, as reported Friday in its supplemental commitment of traders report. Traditional large speculative traders were net long 114,355 contracts compared with net longs of 117,775 in the previous week. Commercials held net short combined futures and options positions totaling 269,361 contracts, down from the previous week's 271,449 contracts.

 

On tap for Tuesday, U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 11:00 a.m. EST.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled at fresh highs Tuesday on strong fundamentals, but contracts retreated from earlier highs on concerns over tightening of monetary policy. The benchmark September 2008 soybean contract settled RMB40 higher at RMB5,024 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended at a new closing high for the fourth successive trading day Tuesday in anticipation of strong export numbers and taking cues from gains in the soyoil market. The benchmark May contract on the Bursa Malaysia Derivatives ended MYR26 higher at MYR3,625 a metric tonne.