March 12, 2010

 

CBOT Soy Outlook on Friday: Seen firm; dollar weakness, oversold

 

 

Soybean futures at the Chicago Board of Trade are poised for a firm start to Friday's day session, garnering support from outside markets and pre-weekend position evening.

 

Overnight, CBOT March soybeans ended 7 1/2 cents higher at US$9.33 a bushel, and May soybeans were 6 1/4 cents higher at US$9.36 3/4.

 

A drop in the U.S. dollar spurred broad based commodity gains overnight, with traders expected to take profits on short soy positions following Thursday's sharp declines.

 

A lower U.S. dollar supports commodity prices due to perceptions it increases investors' appetite for risk and makes U.S. grain cost less in world markets.

 

The market is perceived as oversold and due for a technical bounce ahead of the weekend following Thursday's slide to one-month lows, according to a market note from Midwest Market Solutions.

 

A technical analyst said first resistance for May soybeans is seen at US$9.41 and then at US$9.50. First support is seen at Thursday's low of US$9.29 and then at US$9.25.

 

Concerns about delays in loading supplies at Brazilian ports, a tight U.S. balance sheet and a fresh export sale of U.S. soybeans to China is seen providing underlying support.

 

However, traders are expected to take a cautious approach to pushing prices higher, fears of tightening monetary policy in China and potentially record soybean crops in South America applying pressure.

 

The Brazilian Vegetable Oils Industry Association, or Abiove, raised its forecast for the 2009-10 soy crop to 67.6 million metric tonnes on Friday. Abiove's Feb. 9 estimate pegged the 2009-10 soybean crop at 65.2 million tonnes. The 2008-09 crop produced 57.8 million tonnes.

 

CBOT March soy futures contracts expire at 1 p.m. EST.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled lower Friday, along with the fall on outside markets on rate-increase concerns. The September 2010 soybean contract settled down RMB41, or 1.1%, at RMB3,815 a metric tonne.

 

Cash soybean prices in China's major producing areas fell slightly in the week ended Friday, along with soyoil and soymeal prices, under pressure from declining counterparts in Chicago and low local production rates.

 

Crude palm oil futures on Malaysia's derivatives exchange ended lower Friday as demand eased in the cash market and amid speculative long liquidation, trade participants said. The May contract on Bursa Malaysia Derivatives ended MYR11 lower at MYR2,649 a metric tonne.