May 20, 2009

 

CBOT Soy Outlook on Wednesday: Set to extend uptrend on tight supplies

 

 

The upward mobility of Chicago Board of Trade soybean futures are set to continue Wednesday, with tightening old crop supplies remaining the bullish driver of prices, analysts said.

 

CBOT soybean futures are seen opening 10 cents to 12 cents higher, with soy product futures following overnight price action.

 

The absence of fresh bearish news to offset bullish fundamentals is keeping sellers on the run, unwilling the fight the upward trend that's been in place for the past two-months, said Vic Lespinasse, analyst with Grainsanalyst.com.

 

Declining private estimates for U.S. ending stocks, strong export demand and shrinking Argentina crop forecasts are the underlying features buoying the market, analysts said.

 

A technical analyst said prices are in an 11-week-old uptrend on the daily bar chart. The next upside price objective for July soybeans is to push and close prices above psychological resistance at US$12.00 a bushel. The next downside objective for July soybeans is pushing and closing prices below solid support at the April high of US$10.64 1/2 a bushel.

 

The July/November bull spread is another feature traders will watch, as the spread continues to widen, climbing to US$1.66 a bushel Tuesday, up from Monday's settlement of US$1.59 1/2 cents.

 

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.

 

Futures are also garnering strength from solid export demand for soymeal and soyoil. Stronger soymeal export demand has spawned another bullish argument for the soybean market as the boost in crushing activity puts an additional strain on tight old crop inventories.

 

Private exporters reported to the U.S. Department of Agriculture export sales of 100,000 metric tonnes of soybean meal for delivery to unknown destinations during the 2009-2010 marketing year, the USDA said Wednesday.

 

New crop futures are also garnering support from concerns a return of cool, wet Midwest weather next week will further delay plantings in the eastern Midwest, analysts said.

 

DTN Meteorlogix Weather said dry weather in the Midwest at this time improves conditions for corn and soybean planting. Rainfall begins to increase in the western corn-belt later this week and in the eastern corn-belt early next week with cool, unsettled weather expected across the Midwest next week. The return to cool, wet weather will maintain significant delays for soybean planting in the eastern Midwest.

 

Meanwhile, the Argentine Rural Confederation, or CRA, estimated Argentina's 2008-09 soy production at just 30.5 million metric tonnes, according to a press release issued Tuesday. CRA's forecast is significantly lower than the 32.8 million tonnes forecast by the Buenos Aires Cereal's exchange and way down from early expectations for a 50 million-tonne crop. CRA is an Argentina farm group.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday, tracking the rise in CBOT prices. Crude palm oil futures on Malaysia's derivatives exchange ended lower Wednesday on late profit-taking ahead of a holiday, said trade participants.