March 11, 2010

 

CBOT Soy Outlook on Thursday: Lower; bearish factors to influence direction

 

 

Soybean futures at the Chicago Board of Trade are expected to start Thursday's day session on the defensive, as the market factors in a host of bearish influences.

 

CBOT soybeans are seen opening 3 cents to 5 cents lower.

 

Disappointing weekly export sales, the advancing record South American soybean harvest and the shift of demand from U.S. origins serve as catalysts for the lower theme.

 

The inability of the market to follow through on Wednesday's rally overnight, after the market priced in a tighter U.S. supply and demand balance sheet, set the negative wheels in motion, analysts said.

 

Overnight, CBOT March soybeans ended 6 1/4 cents lower at US$9.45 3/4 a bushel, and May soybeans were 4 1/4 cents lower at US$9.53 3/4.

 

The absence of fresh supportive news, with fears of China hiking interest rates in an effort to curb inflation is seen weighing on prices. Credit tightening in China is seen reducing Chinese firms' ability to purchase imports. China is the world's largest importer of soybeans.

 

Outside macro markets are slightly lower, aiding to the lower theme. Poor weekly export sales provide fundamental pressure, as it reflects the shifting of interest of world buyers to South America, said Jason Roose, analyst with U.S. Commodities.

 

However, choppy price action may emerge, as reports of loading delays at Brazilian ports and a tight U.S. balance sheet provided underlying support to limit losses, he added.

 

A technical analyst said first resistance for May soybeans is seen at Wednesday's high of US$9.64 1/4 and then at US$9.71 1/2. First support is seen at US$9.50 and then at Wednesday's low of US$9.41 3/4.

 

U.S. Department of Agriculture reported total weekly soybean export sales were a net sales reduction of 50,700 metric tonnes for the week ended March 4, with a net sales reduction of 115,800 tonnes reported for the 2009-10 marketing year. China cancelled 192,400 tonnes of previously purchased soybeans. Analysts had forecast sales between 200,000 and 350,000 metric tonnes.

 

Soymeal sales were a net 2,200 tonnes. Trade estimates ranged from 75,000 to 150,000 tonnes. Soyoil commitments were net sales reduction of 9,400 metric tonnes. Analysts had forecast sales between 10,000 and 20,000 tonnes.

 

Meanwhile, soyoil is seen garnering some light support from news the U.S. Senate voted Wednesday to extend until the end of 2010 a tax credit that has propped up the biodiesel industry. The one-year extension was included in a roughly US$150 billion tax package. The tax credit gives blenders US$1 for every gallon of biodiesel blended into supplies. The credit had expired at the end of 2009.

 

In overseas markets, crude palm oil futures on Malaysia's derivatives exchange ended lower Thursday following profit-taking after yesterday's rally, said trade participants. The May contract on Bursa Malaysia Derivatives ended MYR25 down at MYR2,660 a metric tonne.