May 28, 2008

 

CBOT Soy Outlook on Wednesday: Down 3-5 cents; outside markets a dominant influence

 

 

Chicago Board of Trade soybean futures are seen starting Wednesday's day session on the defensive, pressured by bearish outside market influences.

 

CBOT soybean futures are called to start the session 3 to 5 cents lower. In overnight electronic trading, July soybeans were 3 1/2 cents lower at US$13.44 1/4, November soybeans were 4 1/4 cents lower at US$13.37. July soyoil was 45 points lower at 61.75 cents per pound and July soymeal was US$0.50 higher US$335.50 per short tonne.

 

The outside markets will once again remain a dominant influence on prices, with lower crude oil and precious metals combined with a stronger U.S. dollar laying the ground work for end-of-month position evening, analysts said.

 

Weather forecasts calling for favorable conditions for the rapid conclusion of corn plantings and the expansion of soybean seedings and emergence are expected to apply some pressure to prices as well, analysts added.

 

However, downside pressure is seen limited by bullish demand outlooks amid news of the resumption of the Argentine farmers' strike that is expected to generate near term export demand for U.S. soybeans and products, a CBOT floor trader said.

 

Argentina's farmers resumed their strike Wednesday, refusing to buy or sell grains and cattle until the end of next Monday, farm leaders announced Tuesday. While roadblocks aren't planned, as in earlier strikes, farmers will retain grains and stop selling beef Thursday, Agrarian Federation President Eduardo Buzzi said at a press conference.

 

Meanwhile, a technical analyst said that despite Tuesday's sharp declines, prices are still trapped in that sideways trading range between the April high of US$14.15 and the May low of US$12.44. The direction in which prices break out of this trading range is likely to be the next significant trend in prices. The next downside price objective for the bears is pushing and closing prices below solid technical support at last week's low of US$13.12 1/2. The next upside price objective for the bean bulls is to push and close prices above psychological resistance at US$14.00 a bushel.

 

First support for July soybeans is seen at Tuesday's low of US$13.40 and then at US$13.25. First resistance is seen at US$13.72 and then at Tuesday's high of US$13.90.

 

U.S. Department of Agriculture said 52% of the U.S. soybean crop was planted, up from 27% last week and down from the average of 67%. Traders had expected 50% to 60% of the crop to be planted.

 

"Certain states were able to make some pretty decent progress, but they're trying to concentrate on getting corn in the ground," said Joel Karlin, who singled out Illinois, Indiana, Ohio and Iowa.

 

Illinois continued to lag, as 39% of its crop was planted, compared to the average of 75%. In Indiana, 38% of the crop was planted, up from 23% the previous week but down from the average of 67%.

 

Emergence rates for the U.S. crop were also well below average. The USDA said 12% of the crop emerged compared to the average of 34%.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled lower Wednesday, tracking a fall in CBOT prices Tuesday. The benchmark January 2009 soybean contract settled RMB30 lower at RMB4,577 a metric tonne, or down 0.7%.

 

Crude palm oil futures on Malaysia's derivatives exchange fell 3.38% Wednesday, succumbing to heavy selling pressure due to weak demand in the cash market and lower soyoil and global crude oil prices, said trade participants.