May 6, 2009

 

CBOT Soy Outlook on Wednesday: Up 7-10 cents; feed off bullish fundamentals

 

 

Traders at the Chicago Board of Trade expect a firm start to Wednesday's day session for soybean futures, as the market continues to feed off bullish underlying supply and demand fundamentals.

 

CBOT soybean futures are called to open 7 cents to 10 cents higher. CBOT soy product futures are seen higher in tune with overnight action.

 

The combination of tight old crop stocks, strong Chinese demand and shrinking Argentina production prospects remain bullish drivers underpinning prices, analysts said.

 

Argentina's Agriculture Secretariat said in its weekly crop report Tuesday that 2008-09 soy crop yields continue to disappoint due to drought damage as the harvest advances.

 

The soybean market's trend is up, and sellers are taking a very cautious approach to stepping in front of the market, as end users continue to buy breaks to satisfy near-term needs, analysts said.

 

Futures are in an inverted market across the board and that's usually a sign of a very strong market, said Vic Lespinasse, analyst with Grainsanlyst.com.

 

However, futures remain volatile and traders have not been shy about booking some profits on any sign of upside exhaustion in recent sessions.

 

The bull spreads meanwhile are expected to remain a featured attraction amid bullish old crop supply and demand features, with the July/November spread settling at a new high for the spread at US$1.40 1/2 a bushel Tuesday.

 

The July-November spread is a bull spread - long a nearby contract and short a deferred contract. It is called a bull spread because these spreads most often perform best in bullish, demand-driven markets. In such cases where a commodity is in short supply, nearby contracts can go to significant premiums over the deferred and outer contracts may lag as they expect deliveries from future production.

 

A technical analyst said first resistance for July soybeans is seen at Tuesday's high of US$11.16 3/4 and then at this week's high of US$11.27. First support is seen at Tuesday's low of US$10.92 and then at this week's low of US$10.85.

 

In deliveries, May soybean deliveries totaled 8 lots. Customer accounts at Man Professional Clearing stopped all 8 lots. The last trade date assigned was April 15.

 

May soyoil deliveries totaled 2,080 lots. Customer accounts at Man Professional Clearing issued and stopped 1,222 lots and 1,409 lots respectively. The last trade date assigned was May 5.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday, supported by higher soyoil prices. Crude palm oil futures on Malaysia's derivatives exchange rose Wednesday, erasing most of the previous day's losses on expectations that Indonesia may impose export taxes in June after a six-month hiatus.