March 17, 2010

 

CBOT Soy Outlook on Wednesday: Up 2-3 cents, dollar weakness lends support

 

 

Soybean futures at the Chicago Board of Trade are poised to follow through on a firmer overnight theme amid supportive outside market influences in the absence of fresh fundamental directives.

 

CBOT soybeans are seen opening 2 cents to 3 cents higher.

 

Overnight, CBOT May soybeans were 1 1/4 cents higher at US$9.46 1/4 a bushel.

 

The market continues to mark time, awaiting fresh news, with prices holding within a recent trading range. The lack of changes to the fundamental picture of the market is allowing prices to rebound from prior lows, with weakness in the U.S. dollar providing psychological support to commodities in general.

 

A lower U.S. dollar supports commodity prices due to perceptions that it increases investors' appetite for risk and makes U.S. grain cost less in world markets. Soybeans are also linked to crude oil because biodiesel is made from soyoil and funds often trade in a basket of commodities.

 

Traders are looking ahead to the March 31 planting and stock reports, with market shorts covering some positions in an effort to reduce some risk exposure, analysts said.

 

"After rallying back up to US$9.60 per bushel in early, March, the May CBOT contract has fallen back near the US$9.30 support level, this sideways market action should persist until the March Planting Intentions report," according a Macquarie Commodities Research note.

 

Meanwhile, "logistical constraints in Brazil, stemming from the transferring of such a huge crop to South American export channels and incremental U.S. soybean exports may prevent old crop prices from collapsing over the next few months," Macquarie added in the note.

 

Nevertheless, upside potential remains limited, as record South American production will continue to provide bearish pressure.

 

A market technician said the next downside price objective for May soybeans is pushing and closing prices below solid technical support at the February low of US$9.11. The next upside technical objective is pushing and closing May prices above solid technical resistance at last week's high of US$9.64 1/4.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday, amid broad gains in base metals futures and equities. The September 2010 soybean contract settled up RMB28, or 0.7%, at RMB3,848 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended higher Wednesday tracking positive crude oil and soyoil futures in after-hours trade. The June contract on Bursa Malaysia Derivatives ended MYR26 higher at MYR2,595 a metric tonne.