March 17, 2008

 

CBOT Soy Outlook on Monday: Down 5-10 cents, carryover sales, outside jitters

 

 

Soybean futures on the Chicago board of Trade are expected to start Monday's day session on the defensive, extending the overnight theme on follow-through selling from Friday and outside market jitters.

 

CBOT soybean futures are called to start the session 5 to 10 cents lower.

 

In overnight electronic trading, May soybeans were 9 1/4 cents lower at US$13.43 1/2, July soybeans were 10 1/4 cents lower at US$13.51 1/4. May soyoil was 96 points lower at 59.60 cents per pound and May soymeal was US$1.10 lower at US$342.70 per short tonne.

 

Carryover weakness from Friday's 50 cent limit-down move in some contracts is seen weighing on futures in early trade, analysts said.

 

Nervous longs are trimming length from the market, as jitters associated with weakness in outside equity and financial markets have traders taking a cautious approach, particularly with large speculative funds holding large long positions in the market, analysts added.

 

News that JPMorgan Chase & Co. (JPM) during the weekend agreed to buy Bear Stearns Cos. (BSC) at a massive discount and the Federal Reserve stepped in with an emergency discount rate cut is weighing on investor confidence as well, traders said.

 

A sharp slide in crude oil futures off overnight gains, as well as losses in Asian markets overnight, is setting the stage for a lower start to trading, analysts said. However, traders will remain on guard for commercial buying on breaks and any signs that funds are willing to defend their length in the market, a CBOT broker said.

 

At 9:17 a.m. EDT, April crude oil futures are US$4.57 lower at US$105.64 per barrel.

 

A technical analyst said Friday's price action could have been the beginning of a downside breakout from a bearish pennant pattern on the daily bar chart. Serious near-term chart damage has been inflicted recently, including more Friday. Technical odds still suggest a near-term market top is in place, he said.

 

The next upside price objective for July soybeans is to push and close prices above psychological resistance at US$14.00 a bushel. The next downside price objective is pushing and closing prices below solid support at US$13.34. First resistance for July soybeans is seen at US$13.75 and then at US$14.00. First support is seen at US$13.50 and then at US$13.34.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled sharply lower Monday, along with limit-down in most edible oil contracts. The benchmark January 2009 soybean contract settled RMB122 lower at RMB4,400 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange fell sharply Monday on the setting up of fresh short positions, tracking weakness in soyoil prices amid changing trading strategy of funds and slower growth in Malaysian palm oil exports, said trade participants. The new benchmark June contract on Bursa Malaysia Derivatives ended MYR89 lower at MYR3,600 a metric tonne after reaching an intraday low of MYR3,515/tonne.

 

Meanwhile, index funds lowered their net long CBOT soybean futures and options positions combined, which now totals 183,252 contracts as of March 11, down from 195,809 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 81,227 contracts compared with net longs of 95,466 in the previous week. Commercials held net short combined futures and options positions totaling 234,771 contracts, down from the previous week's 261,337 contracts.

 

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