April 27, 2009

 

CBOT Soy Outlook on Monday: Sharply lower; swine flu worries weigh

 

 

Chicago Board of Trade soybean futures are expected to start Monday's day session sharply lower, pressured by broad based selling related to fears associated with the swine flu.

 

CBOT soybean futures are called to open 40 cent to 45 cents lower.

 

Panic selling broke out across global markets overnight on the breakout of swine flu in Mexico and reports of cases in the U.S.

 

"The swine flu fears will have a negative psychological affect on the market, rather justified or not," said Vic Lespinasse, analyst with Grainsanalyst.com.

 

The swine flu raises concern about reduced feed demand and with equities and crude oil tumbling in early market action, traders anticipate some panic selling as investors shift assets to precious metals and treasuries.

 

New crop futures are seen garnering pressure from weekend rains that will keep corn plantings slow and raise the possibility of some corn acres shifting to soybeans the longer the delays last, Lespinasse said.

 

However, a tight old crop balance sheet remains a supportive feature that should limit the long term effects of panic selling in the market, said Dax Wedemeyer, analyst with U.S. Commodities in West Des Moines, Iowa.

 

A technical analyst said the next upside price objective for July soybeans is to push and close prices above solid technical resistance at the April high of US$10.64 1/2 a bushel. The next downside price objective is pushing and closing prices below psychological support at US$10.00 a bushel.

 

Large speculative traders now hold 70,717 net long positions in CBOT soybean futures and options combined contracts as of April 21, compared with net longs of 61,937 in the previous week, according to the Commodity Futures Trading Commission in its supplemental commitment of traders report.

 

Index funds increased their net long positions in CBOT soybean futures and options. The combined number rose to 117,838 contracts from 113,555 the prior week, according to CFTC in its supplemental commitments of traders report released Friday. Commercials held net short combined futures and options positions totaling 159,773 contracts, up from the previous week's 149,884 contracts, as reported in the CFTC supplemental report.

 

On tap for Monday, U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 11 a.m. EDT and its weekly crop progress report at 4 p.m. EDT.

 

CBOT soy product futures are seen lower, in unison with soybeans.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled sharply lower Monday, plagued by concerns about the possible effects of the swine flu outbreak in Mexico and the U.S. Crude palm oil futures on Malaysia's derivatives exchange fell as much as 4.3% during the first few minutes of trading Monday on long liquidation, as investors took leads from a sharp downward correction in the prices of soybean oil and concerns about the possible effects of the deadly outbreak of swine flu that started in Mexico.