May 17, 2007

 

CBOT Soy Outlook on Thursday: Down 3-5 cents; e-CBOT, overbought conditions

 

 

Chicago Board of Trade soybean futures are seen starting Thursday's day session on weaker footing, in tune with overnight trade, as the market takes a breather from its recent price run up.

 

CBOT soybean futures are called to start the session 3 to 5 cents lower.

 

In overnight e-CBOT trading, July soybeans were 5 1/2 cents lower at US$7.87 1/4 per bushel, and November dropped 5 1/4 cents to US$8.16.

 

The market is overdue for some consolidation after four-straight days of a speculative led price gain, analysts said.

 

Overbought conditions and favorable planting conditions should lend pressure to prices, but a quiet news front will keep attention on technical factors, with speculative funds watched heavily for direction, analysts added.

 

The 9-day Relative Strength Index for July soybeans was 78.88 as of Wednesday's close. A RSI reading above 70.00 is considered overbought.

 

The funds are in the driver's seat, and with bullish chart signals, market psychology is still higher, a CBOT commission house broker said. Nevertheless, if speculative fund buying pauses, profit taking pressure should emerge, he added.

 

A market technician said market bulls have gained solid upside technical momentum recently. However, the market is now short-term overbought, technically, and due for a downside "correction" very soon. The next upside price objective for July soybeans is closing prices above major psychological resistance at US$8.00. The next downside price objective is closing prices below solid support at US$7.60.

 

First resistance for July soybeans is seen at Wednesday's high of US$7.96 1/2 and then at US$8.00. First support is seen at US$7.88 and then at US$7.85.

 

The DTN Meteorlogix Weather Service forecast calls for mainly dry conditions Thursday through Saturday in the western Midwest. Temperatures will average below normal Thursday, near to above normal west and below normal east on Friday, and above normal Saturday. Dry conditions or with only a few light showers are seen in northern regions of the belt during Sunday. There is a chance for scattered showers to develop Monday and Tuesday. Rainfall potential with this system looks to be 0.10-0.75 inch and locally heavier.

 

In the eastern Midwest, mainly dry conditions are on tap for Thursday through Saturday. Temperatures will average below or much below normal Thursday and Friday, and near to below normal Saturday. Mainly dry conditions are seen for Sunday and Monday. Temperatures will average near to below normal Sunday, and near to above normal west and near to below normal east Monday.

 

The U.S. Department of Agriculture reported weekly soybean export sales were 358,900 metric tonnes for the week ended May 10. Included in the total were net sales of 222,900 metric tonnes for the 2006-07 marketing year. The 2006-07 sales were 9% higher than the previous week and 6% higher than the prior four-week average. Analysts had forecast sales between 200,000 and 350,000 metric tonnes. The principal buyers were Malaysia with 60,000 metric tonnes, and unknown destinations with 55,000 tonnes. Soymeal sales were a net 88,700 tonnes, and soyoil commitments were 3,500 metric tonnes.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled mostly higher Thursday, following Wednesday's gains in CBOT soybeans. But the benchmark September 2007 contract settled RMB4 lower at RMB3,234 a metric tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended higher Thursday, but gains were limited by selective profit-taking and thin buying interest because of a national holiday in Indonesia and in several European countries. The benchmark August CPO contract ended at MYR2,333 a metric tonne, up MYR10.