May 21, 2009

 

CBOT Soy Outlook on Thursday: Lower; outside markets, bull spread retreats

 

 

Soybean futures at the Chicago Board of Trade are seen starting Thursday's day session on the defensive, influenced by weakness in outside markets and pressure from a retreat in bulls spreads Wednesday.

 

CBOT soybean futures are seen opening 9 cents to 12 cents lower, with soy product futures following overnight price action.

 

The weakening of bulls spreads sets the stage for profit taking to emerge, with traders looking to even up some positions heading toward the extended holiday weekend, a CBOT floor analyst said.

 

The July/November bull spread Wednesday, slipped to US$1.54 1/2 a bushel, down from Tuesday's settlement of US$1.66 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.

 

Nervous selling is seen surfacing on fears the market has priced in its bullish factors, with traders nervous that current high prices may curb demand, analysts said. Lower crude oil, equities and a firmer U.S. dollar is expected to add pressure to prices.

 

Nevertheless, tight availability of old crop supplies and concerns that lingering planting delays could push fall harvests back and further tighten supplies in September is expected to limit downside potential.

 

Talk of demand rationing has been a key influence on the market's spike in prices, but based on weekly export sales, demand has not backed off, a CBOT broker said.

 

U.S. Department of Agriculture reported total weekly soybean export sales were a net 1,367,600 metric tonnes for the week ended May 14. Sales for 2008-09 were a net 700,600 metric tonnes. Analysts had forecast sales between 500,000 and 850,000 million metric tonnes.

 

Soymeal sales were a net 227,900 tonnes. Trade estimates ranged from 200,000 to 300,000 tonnes. Soyoil commitments were 3,500 metric tonnes. Analysts had forecast sales between 10,000 and 30,000 tonnes.

 

DTN Meteorlogix Weather said dry weather is improving conditions for corn and soybean planting. However, rainfall will begin to increase in the western corn-belt in the next few days and in the eastern corn-belt early next week continuing into midweek. A turn to drier weather with mild temperatures is now indicated for the latter half of next week favoring corn and soybean planting, Meteorlogix added.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled higher Thursday, following gains on CBOT Wednesday. Crude palm oil futures on Malaysia's derivatives exchange fell as much as 4.7% Thursday, as rains lashed oil palm growing regions and on concerns that high prices may curb demand, particularly in the biofuels sector, said trade participants.