June 20, 2008

 

CBOT Soy Outlook on Friday: Follows overnight drop, expected down 3-5 cents

 

 

Soybean futures are expected to open 3-to-5 cents lower Friday at the Chicago Board of Trade, following selloffs overnight and in Thursday trading.

 

Electronic trading closed down 3 1/2 cents for July soybeans to US$15.42 a bushel, while September soybeans lost 6 1/4 cents to US$15.21 3/4 a bushel, closing at the session low, and November soybeans dropped 6 cents to US$15.15 1/2.

 

"Weather conditions have improved for the soybean crop and late planting activity in many areas given the drier conditions this week," Donane Agricultural Services said. "News that China had canceled a large old-crop export sale and weakness in crude oil pressured prices yesterday. However, crude oil bounced overnight and rain in the Missouri River Valley and flooding near the Mississippi will limit losses and could push prices higher."

 

Limited rainfall during the next 3-5 days will improve conditions for corn and soybeans in the Midwest but disruptions and delays to planting and emergence will continue due to cool, unsettled weather and the lack of sunshine, according to a DTN Meteorlogix forecast.

 

"Rainfall is expected to increase next week but whether heavy rains and flooding will return is uncertain," the private weather forecasting firm said.

 

The Argentine farmer strike is still underpinning the market as well. Farmers said they will continue to prevent export sales of their products until at least Friday night. Argentina is the world's top exporter of soymeal and soyoil and is the third largest supplier of soybeans.

 

"With the situation in Argentina still in limbo near term demand has been switched to Brazil and the US," said analyst Kevin R. Kjorsvik of Benson Quinn Commodities. "Prices in the gulf are now competitive with both Brazil and Pacific Northwest offers."

 

Rumors of more business off the Pacific Northwest, which helped to strengthen the bean spreads Thursday, Kjorsvik said.

 

Despite Thursday's lower close in November soybeans, which was under pressure from profit taking, a technical analyst noted "bulls are still in technical control with still no signs of a market top being close at hand." And, the analyst said, the bulls hold the same scenario in December soybean meal, but added that while bulls' near-term technical advantage in December soybean oil, it's fading.

 

China's fuel price hikes will raise grain prices at least 10% during harvest this fall due to the increase in production and harvest costs, although the government will give more subsidies to grain farmers as compensation, according to an earlier story by Dow Jones Newswires.

 

Citing Chen Shuwei, vice general manager of Beijing Orient Agribusiness Consultant Ltd., the story said "fuel prices hike will result in an increase in agricultural production costs of 4%-5%, but the subsidies can only make up for less than 20% of the rise."