March 11, 2009

Chicago Board of Trade soybean futures are expected to start Wednesday's day session on firm footing, underpinned by supportive supply and demand data, strength in stock indexes and a weaker U.S. dollar.

 

CBOT soybean futures are called 4 cents to 6 cents higher.

 

The tightening of the U.S. soybean balance sheet as described in a U.S. Department of Agriculture report should provide support to prices, analysts said.

 

However, traders said the market had anticipated tighter stocks, keeping attention on the economy and the macro markets for underlying leadership, analysts added.

 

In early market action, stock indexes are pointing higher, the dollar index is lower and crude oil futures are on the defensive.

 

Nevertheless, the USDA report does provide some fundamental strength for the market to cling to, a CBOT trader said.

 

U.S. soybean ending stocks were pegged at 185 million bushels, down 25 million bushels from the USDA's estimate in February, and below the average analyst estimate of 200 million bushels.

 

"This was a fairly bullish soybean report," said Bill Nelson, analyst with Doane Advisory Service in St. Louis, Mo.

 

"The USDA confirmed good exports, and cut the Argentine soybean crop, and with U.S. ending stocks going under 200 million bushels [there] is kind of a tipping point toward a very bullish scenario," Nelson said.

 

In the supply/demand balance sheet, the government raised its export estimate by 35 million bushels to 1.185 billion bushels while lowering the amount of soybeans it expects to be crushed by 10 million bushels to 1.640 billion bushels.

 

Soybean exports were raised, reflecting record sales to China and reduced export competition from Argentina, the USDA said in the report. The reduced soybean crush was a reflection of continued weak domestic soybean meal demand and poor crush margins, the USDA said.

 

Despite lower production, soybean oil stocks are projected higher due to a sharp reduction in domestic use resulting from lower soybean oil-based biodiesel production, the USDA reported.

 

Soybean oil used for biodiesel is reduced 0.7 billion pounds to 2.2 billion as biodiesel producers face poor margins, reduced export prospects, and strong competition from other feedstocks, the USDA reported.

 

The USDA left its estimate of 2008-09 production for Brazil unchanged at 57 million metric tonnes and lowered Argentina's production 800,000 tonnes to 43 million.

 

Projected soybean world ending stocks for the 2008-09 crop year were estimated at 49.95 million tonnes, up from the 49.87 million forecast in February.

 

Looking at technical charts, the next upside price objective for May soybeans is to push and close prices back above psychological resistance at US$9.00 a bushel. The next downside price objective is pushing and closing prices below solid technical support at last week's low of US$8.38 1/4 a bushel.

 

First resistance for May soybeans is seen at US$8.84 and then at Tuesday's high of US$8.95. First support is seen at US$8.70 and then at Tuesday's low of US$8.61 1/4.

 

March soyoil deliveries totaled 1,481 lots. Customer accounts at Man Professional Clearing issued 1,105 lots and stopped 866 lots. The last trade date assigned was March 10.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Wednesday, as market participants continued to exit positions to book profits. The benchmark September 2009 soybean contract dipped 1% to settle at RMB3,430 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange fell Wednesday on profit-taking and a narrowing palm oil discount to soybean oil, ignoring bullish data released by the Malaysian Palm Oil Board, said trade participants. The benchmark May contract on the Bursa Malaysia Derivatives ended MYR15 lower at MYR1,980 a metric tonne.