June 11, 2008

 

CBOT Soy Outlook on Wednesday: Up 14-16 cents; weather concerns, outside markets

 

 

Soybean futures on the Chicago Board of Trade are expected to open firmly Wednesday, climbing on bullish weather concerns and spillover support from outside market influences.

 

CBOT soybean futures are called to start the session 14 to 16 cents higher.

 

In overnight electronic trading, July soybeans were 16 1/2 cents higher at US$14.63 and November soybeans were 12 cents higher at US$14.53. July soyoil was 94 points higher at 63.59 cents per pound and July soymeal was US$1.00 higher at US$379.50 per short tonne.

 

With major concerns for flooding in the U.S. Midwest, the market is poised to build some risk premium in prices amid nervousness over the potential for smaller yields in conjunction with shrinking stock projections, said Jason Roose, analyst with U.S. Commodities in West Des Moines, Iowa.

 

The relentless rains across the Midwest will keep futures trading a weather market, with traders looking at how much damage is going to occur from Midwest floods, Roose added.

 

The market is factoring in how much premium prices need to ration demand, with lingering strength from continued farmer unrest in Argentina and supportive influences from outside inflationary markets helping to underpin prices, analysts said.

 

However, traders said soybeans are a mature market, and participants will remain on pins and needles with profit taking expected to emerge on any signs of exhausted buying, a CBOT trader added.

 

The DTN Meteorlogix weather forecast said a new round of severe storms is expected Wednesday and Thursday across the U.S. western corn-belt, and Friday in the eastern belt. This likely means more flooding concerns and more concerns about crop condition for both corn and soybeans.

 

A market technician said the next upside price objective for July soybeans is to push and close prices above psychological resistance at US$15.00 a bushel. The next downside price objective for the bears is pushing and closing prices below solid support at US$13.90.

 

First resistance for July soybeans is seen at Tuesday's high of US$14.65 3/4 and then at this week's high of US$14.89 1/2. First support is seen at Tuesday's low of US$14.19 and then at US$14.00.

 

Meanwhile, despite Friday's announcement by Argentina's national farm leaders that the on-again, off-again strike launched in March had been suspended, many local farm groups continued to block grain and livestock transport this week.

 

In addition, the truck owners' organization announced Tuesday that they would launch a nationwide transport blockade to force farmers and the Argentine government to resume negotiations and solve the conflict.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday on rising soybean import costs. The benchmark January 2009 soybean contracts settled RMB39 higher at RMB4,854/tonne.

 

China imported 13.65 million metric tonnes of soybeans in the first five months of the year, up 20.4% from a year earlier, said the General Administration of Customs Wednesday. The figure means China imported 3.48 million tonnes of soybeans in May alone, up 17.6% on year.

 

Crude palm oil futures on Malaysia's derivatives exchange ended 2.2% higher Wednesday as some investors covered shorts while other set up fresh positions anticipating a revival in demand due to a likely delay in soybean plantings and lower yields in the U.S. due to adverse weather. The benchmark August contract on the Bursa Malaysia Derivatives ended MYR76 higher at MYR3,606 a metric tonne, close to the intraday high of MYR3,611/tonne.