April 1, 2008

 

CBOT Soy Outlook on Tuesday: Down 60-70 cents on follow-through selling

 

 

Soybean futures on the Chicago Board of Trade are seen starting Tuesday's day session sharply lower on follow-through selling from Monday's sell-off in response to bearish acreage and inventory data from the Agriculture Department.

 

CBOT soybean futures are called to start the session 60 to 70 cents lower.

 

In overnight electronic trading, May soybeans were 70 1/4 cents lower at US$11.27, July soybeans were 73 1/4 cents lower at US$11.41 3/4. May soyoil was 182 points lower at 49.66 cents per pound and May soymeal was US$19.70 lower at US$302.66 per short tonne. Higher-than-expected soybean inventories and projected 2008 acreage continues to weigh on futures, as the psychology of market shifts and buyers run for cover, analysts said.

 

A firmer U.S. dollar coupled with weakness in crude oil and metal futures is seen adding further pressure to keep prices tumbling lower following Monday's limit-down slide, analysts added.

 

Overnight declines in Asian markets and talk of Argentina moving closer to ending its 19-day farmers strike was another bearish factor expected to weigh on prices, traders said.

 

Meanwhile, by virtue of the soy complex settling at their exchange imposed lower daily trading limits Monday, price limits will expand for all three legs of the complex Tuesday. Soybean daily limits were expanded to US$1.05 per bushel, Soymeal limits expanded to US$30.00 a short tonne, and limits on soyoil expanded to 550 points, or 55 cents, per pound. Minimum margins for CBOT soybean, mini-soybean and soy oil futures will be raised at the close of business Tuesday.

 

A technical analyst said very serious near-term chart damage has been inflicted recently. Technical odds suggest a near-term market top is in place. The next upside price objective for July soybeans is to push prices above solid technical resistance at US$12.74 a bushel, which would fill on the upside Monday's big downside price gap on the daily bar chart. The next downside price objective is pushing and closing prices below psychological support at US$12.00.

 

First resistance for July soybeans is seen at Monday's high of US$12.27 and then at US$12.50. First support is seen at US$12.00 and then at US$11.75.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled limit-down Tuesday on a bearish prospective planting report issued Monday by the USDA. The benchmark January 2009 soybean contract settled down RMB204 at RMB3,882 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange fell 10.66% Tuesday to their lowest levels in 2008 but recovered off lows on some short-covering and fresh buying, said trade participants. The benchmark June contract on the Bursa Malaysia Derivatives ended MYR216 lower at MYR3,179 a metric tonne, off an intraday low of MYR3,033/tonne.

 

In other news, in a bid to resolve a 19-day farm strike that has produced food shortages and a major political crisis, Argentine Economy Minister Martin Lousteau on Monday announced measures to compensate small-scale farmers for the effect of a recent, controversial tax hike on soy exports.

 

However, leaders of Argentina's main farm groups said that, at first glance, the concessions announced by the president and economy minister on Monday evening didn't address the core of the problem that has driven farmers to strike for the past 19 days.