May 7, 2009

 

CBOT Soy Outlook on Thursday: Up 9-11 cents on fundamentals, outside support

 

 

Soybean futures at the Chicago Board of Trade are poised to extend its uptrend in Thursday's day session, buoyed by strong fundamentals and supportive outside market influences.

 

CBOT soybean futures are called to open 9 cents to 11 cents higher. CBOT soy product futures are seen higher in tune with overnight action.

 

Tight old crop inventories, strong China demand and declining South American crop estimates have traders set to push prices higher in an attempt to ration consumption of old crop supplies, analysts said.

 

The market jumped to new 7-month highs overnight, and strength in crude oil futures, higher stock indexes and technical momentum are expected to extend the gains in early action, analysts said.

 

However, any sign of exhausted upside movement opens the door for profit taking to emerge, a feature that has been consistent in recent sessions.

 

Traders are expected to keep a close eye on bull spreads following the steadying of the July/November spread Wednesday. The spread had widened for the previous five trading days. "The July/November bean spread serves as a barometer of intrinsic strength in old crop soybeans," AgResource Company said in a market note.

 

The July-November spread is a bull spread, and refers to being 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.

 

A technical analyst said the next upside price objective for July soybeans is to push and close prices above solid technical resistance at US$11.50 a bushel. The next downside price objective is pushing and closing prices below solid support at US$10.50 a bushel.

 

Meanwhile, the agricultural survey group of Brazil's Census Bureau, or the IBGE, on Thursday put the 2008-09 soy crop at 57.6 million metric tonnes. The IBGE's new data is slightly below the 58.5 million tonnes in its previous estimate due to the dry weather in southern states, such as Rio Grande do Sul. The National Commodities Supply Corp, or Conab, lowered Brazil's crop to 57.6 million metric tonnes also, citing dry weather especially in southern states.

 

The U.S. Department of Agriculture reported total weekly soybean export sales were a net 775,400 metric tonnes for the week ended April 30. Sales for 2008-09 were a net 654,400 metric tonnes. Analysts had forecast sales between 500,000 and 900,000 million metric tonnes.

 

Soymeal sales were a net 195,500 tonnes. Trade estimates ranged from 125,000 to 225,000 tonnes. Soyoil commitments were 34,600 metric tonnes. Analysts had forecast sales between 10,000 and 25,000 tonnes.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled slightly higher Thursday, supported by Wednesday's rally on CBOT. Crude palm oil futures on Malaysia's derivatives exchange erased intraday losses Thursday and even moved in positive territory on supply concerns after the government said stocks may have slipped to multi-year lows of around 1.2 million metric tonnes.