April 25, 2007

 

CBOT Soy Outlook on Wednesday: Up 2-3 cents; oversold, spillover from grains

 

 

Soybean futures on the Chicago Board of Trade are seen starting Wednesday's day session higher on a mild technical bounce from oversold conditions and spillover support from neighboring grain futures.

 

In e-CBOT trade, May was 2 3/4 cents higher at US$7.12 1/2, July was 2 cents higher at US$7.28 1/4, and November soybeans were 2 3/4 cents higher at US$7.56.

 

CBOT soybean futures are called to start the session 2 to 3 cents higher.

 

The market is technically oversold, and with corn and wheat seen higher, soybeans should be an early follower, said Don Roose, president U.S. Commodities in West Des Moines, IA.

 

Firm basis levels in South America and a lack of producer selling in the U.S. is seen aiding the supportive tone, analysts said.

 

However, despite firm early calls, upside potential may remain limited as traders remain cautious amid ideas weather delays to corn plantings may ultimately lead to additional soybean acres, Roose added.

 

Otherwise, a quiet news front should keep technical factors in play, with many traders unwilling fight the current downtrend in the market, making downside movement the path of least resistance, a CBOT floor broker said.

 

A technical analyst said a minor bear flag has formed on the daily bar chart for July futures, and Tuesday's price action could be the beginning of a downside breakout from that pattern. A two-month-old downtrend line is in place on the daily bar chart. There is some strong underlying technical support just below the market, starting at the US$7.22 level. Soybean bulls would regain some upside technical momentum by producing a close above solid chart resistance at US$7.50. The next downside price objective is closing prices below solid support at US$7.22.

 

First resistance for July soybeans is seen at Tuesday's high of US$7.33 1/4 and then at US$7.40. First support is seen at Tuesday's low of US$7.25 1/2 and then at US$7.22.

 

The DTN Meteorlogix Weather Service forecast said episodes of showers and rain Wednesday and early Thursday should occur through eastern Nebraska, most of Iowa and northern Missouri. The balance of the western Midwest should see only a few light showers during this time. It should be drier later Thursday and mostly dry Friday.

 

In eastern Midwest, rain and possible thunderstorms are on tap for Wednesday, with additional rain and showers seen for Thursday. Drier conditions return Friday. Temperatures will average near to mostly below normal Wednesday and Thursday, and below normal Friday.

 

In other news, Uruguay's 2008/09 soybean harvested area is forecast to increase to 400,000 hectares, up from 360,000 in MY2007/08. Production is forecast up to 810,000 metric tons from 750,000 tonnes in MY 2007/08, according to a U.S. Department of Agriculture attach¨¦ report posted Tuesday on the Foreign Agricultural Services Web site.

 

Meanwhile, a weak dollar in comparison to the Brazilian real has some soy traders wondering when soy becomes a thing of the past in Mato Grosso, currently Brazil's top soy producing state. "With current prices the way they are, and the dollar where it is today, the day is coming when Mato Grosso is going to be wiped off the soy map," said Jair Alencar Freire, trade manager for Archer Daniels Midland in Sao Paulo.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled mostly lower Wednesday, following Tuesday's CBOT losses. However, the benchmark September 2007 contract settled RMB7 higher at RMB3,080 a metric tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended lower Wednesday as the market succumbed to profit-taking pressure ahead of a slew of holidays. The benchmark July contract ended down MYR27 at MYR2,155 a metric tonne.