July 9, 2008

 

CBOT Soy Outlook on Wednesday: 9-12 cents up on crude oil, tight supplies

 

 

Spillover support from outside markets and continued bullishness about tight supplies are expected to kick Chicago Board of Trade soybean futures higher at the start of Wednesday's day session, analysts said.

 

CBOT soybean futures are called to open 9 to 12 cents per bushel higher. In overnight electronic trading, November soybeans climbed 12 cents to US$15.41 1/2.

 

Soybeans should feel support from firm crude oil futures and weakness in the U.S. dollar index, traders said. A soft greenback is seen as supportive to U.S. commodities because it gives foreign importers more buying power. Concerns about tight soy supplies continue to support the market amid uncertainties about summer weather, said Bryce Knorr, senior editor for Farm Futures. The U.S. Department of Agriculture will update its U.S. 2007-08 and 2008-09 carryout estimates Friday in the July supply and demand report.

 

The average of analysts' estimates for 2007-08 U.S. soybean carryout is 123 million bushels, down a hair from 125 million last month, according to a Dow Jones Newswires survey. The average of analysts' estimates for 2008-09 carryout is 139 million, down from 175 million in June.

 

"The bullish trend for beans remains in tact," Knorr said in a market comment. "Traders aren't anticipating a bearish USDA report on Friday, and so far beans are showing less improvement from recent mild weather than corn, increasing anxieties about tight supplies."

 

Mild weather in Midwest crop areas has weighed on the row crops recently following a run-up to historic highs in soybeans and corn. Weather conditions should remain generally favorable, although delayed development in soy and corn "remains as a significant underlying trade concern," DTN Meteorlogix said in a forecast.

 

"Hot weather, if any, will be relatively short lived," Meteorlogix said. "Shower activity will periodically move into the area, sometimes locally heavy and sometimes only light."

 

Ongoing tensions between farm groups and the government in Argentina continue to provide underlying support to the soy market, a trader said. Soy demand has shifted to the U.S. from Argentina due to recent farmer strikes over a controversial export tax.

 

The next upside price objective for the bulls is to push and close November soybeans above solid resistance at US$15.66 3/4, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at Tuesday's low of US$14.81, he said.

 

First resistance for November soybeans is seen at US$15.50 and then at Tuesday's high of US$15.61 1/2. First support is seen at US$15.00 and then at US$14.81.

 

In Asia, China's soybean futures traded on the Dalian Commodity Exchange reversed losses Wednesday on expectations of supplies lagging demand. The benchmark January 2009 soybean contract settled RMB30 higher at RMB4,950/tonne, or up 0.6%.

 

Crude palm oil futures on Malaysia's derivatives exchange, meanwhile, rose 1.8% Wednesday, recovering from losses for three straight trading days. Investors covered their short, or sold, positions despite weak exports outlook, taking cues from rise in soyoil and crude prices.