March 18, 2008

 

CBOT Soy Outlook on Tuesday: Down sharp; carryover, economic worries linger

 

 

Chicago Board of Trade soybean futures are seen starting Tuesday's day session sharply lower on carryover selling from Monday's limit down close amid lingering economic uncertainties, analysts said.

 

CBOT soybean futures are called to start the session 30 to 40 cents lower.

 

In overnight electronic trading, May soybeans were 38 3/4 cents lower at US$12.64, July soybeans were 40 1/4 cents lower at US$12.78 1/2. May soyoil was 164 points lower at 56.92 cents per pound and May soymeal was US$3.50 lower at US$320.30 per short tonne.

 

The market is expected to extend its defensive theme, as speculative traders continue to trim length in the market in an effort reduce risk exposure, analysts said. The credit crunch and U.S. financial worries are expected to keep traders taking a cautious approach, with participants looking ahead to the U.S. Federal Reserves decision on interest rates, analysts added.

 

The Federal Reserve is expected to release its interest rate decision near 2:15 p.m. EDT Tuesday.

 

However, traders said the ability of the market to cut losses overnight after plunging to limit down levels coupled with strength in outside crude oil and metal futures may serve as a signal that downside pressure may have run its course short term, a CBOT floor analyst said.

 

A market technician said serious near-term chart damage has been inflicted recently, including more Monday. Technical odds firmly suggest a near-term market top is in place, as a V-Top reversal pattern has formed on the daily bar chart.

 

The next upside price objective for the bean bulls is to push and close prices above solid technical resistance at US$13.75 a bushel. The next downside price objective for the bears is pushing and closing prices below psychological support at US$13.00. First resistance for July soybeans is seen at US$13.50 and then at US$13.75. First support is seen at US$13.00 and then at US$12.75.

 

In overseas markets, China's soybean futures, soy products futures and palm oil futures traded on the Dalian Commodity Exchange settled sharply lower Tuesday, amid concerns of a U.S. recession and lower crude oil prices Monday. Most of these contracts hit limit-down at the start of trading. The benchmark January 2009 soybean contract settled RMB176 lower, or 4% limit-down, at 4,224 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange fell sharply to a seven-week low, hitting the daily limit-down amid panic selling on global liquidity concerns. They recovered much of the day's losses after India imposed a ban on exports of edible oils, trade participants said. The benchmark June contract on Bursa Malaysia Derivatives rallied from a seven-week low of MYR3,171 per metric tonne to end at the intraday high of MYR3,450/tonne, down MYR150, or 4.2%.

 

In other news, China's soybean acreage in the major producing regions is likely to increase significantly in 2008, while corn acreage may fall as a result, local media said Tuesday, citing National Bureau of Statistics data. Soybean acreage in Heilongjiang province may rise 19.3% on year to 4.69 million hectares and 17.1% on year to 521,013 hectares in Jilin province, said Liaoning Daily in a report published on the Dalian Commodity Exchange's Web site Tuesday.