May 23, 2008

CBOT soymeal likely to rebound

July Chicago Board of Trade soybean meal futures have this week lagged the gains seen by soy and soybean oil futures, but that could change if soybean meal-soybean oil spreads unwind, according to a technical report.

Much of the reason soymeal has lagged is likely due to spreaders buying soyoil, amid the record-high price spike in crude oil futures this week, and selling soymeal. July soybean meal futures hit a fresh two-week low of US$329.00 a tonne Wednesday.

However, with crude oil futures being well overbought on a near-term technical basis, that market is due for a significant corrective pullback very soon - possibly before traders head home for a long holiday weekend Friday.

Any corrective pullback in the crude oil futures market will also be felt by selling pressure in the soyoil pit. Soymeal bulls will be the beneficiary as spreaders unwind their long soyoil, short soymeal spreads.

July soymeal is presently trading in the lower portion of a well defined six-week-old trading range, bound by solid technical resistance at the top of the range, at the April high of US$363.40, and by solid technical support at the bottom of the range, at the May low of US$322.20.

The direction in which prices "break out" of this trading range is very likely to be the direction of the next significant trend in meal prices.

Overhead technical resistance for July soymeal comes in at US$340.00, at US$343.00, US$345.00 and then at US$350.00. Support is seen at US$332.00 and then at this week's low of US$329.00.