July 16, 2008

 

CBOT Soy Outlook on Wednesday: Down 6-8 cents; overnight theme, outside influences

 

 

Chicago Board of Trade soybean futures are seen starting Wednesday's day session on the defensive, taking their cue from the overnight theme, with outside markets expected to influence direction.

 

CBOT soybean futures are called 6 to 8 cents lower.

 

In overnight electronic trading, August soybeans were 6 1/2 cents lower at US$15.35 1/2 and November soybeans were 6 cents lower at US$15.10. December soyoil was 39 points lower at 64.05 cents per pound and December soymeal was US$3.30 lower at US$398.00 per short tonne.

 

The market is poised to follow through on Tuesday's declines, garnering pressure from weakness in crude oil and a favorable weather outlook for crop development, analysts said.

 

A sharp decline in crude oil prices Tuesday set the tone for commodity markets, and traders will once again pay close attention to the energy sector, a CBOT floor analyst said.

 

Meanwhile, the absence of threatening weather for Midwest crops and a lack of fresh supportive news to attract aggressive buyers is seen producing some consolidative activity, traders said.

 

However, bullish fundamentals remain the underlying driver of prices, limiting declines and uncovering fresh buying on any sign of downside exhaustion, traders added.

 

A technical analyst said Tuesday's price action saw what could be the beginning of a bearish downside breakout from a diamond pattern on the daily bar chart. However, market bulls still have the near-term technical advantage, but have faded and need to show power soon, he added.

 

The next upside price objective for November soybeans is to push and close prices above psychological resistance at US$16.00 a bushel. The next downside price objective is pushing and closing prices below psychological support at US$15.00. First resistance for November soybeans is seen at US$15.30 and then at US$15.50. First support is seen at Tuesday's low of US$15.15 and then at US$15.00.

 

The DTN Meteorlogix Weather forecasts said hot weather over the western Midwest will be fairly short lived as thunderstorms move in from the north and west towards the southeast during the next few days. The eastern Midwest may see a little more of an extended drier, warmer to hotter spell but not enough to significantly impact crops.

 

In other news, the Argentine Senate is scheduled to vote Wednesday on the controversial soybean export tax. Argentina's House approved the president's sliding-scale grain export tax earlier this month. The tax was imposed by executive order in March. Angry farmers reacted to the higher duties on grain shipments with a series of crippling strikes and roadblocks that caused food shortages in the cities, cut off grain exports and blocked nationwide transportation.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled lower Wednesday, in line with Tuesday's tumble at CBOT. The benchmark January 2009 soybean contract settled RMB62, or 1.2%, lower at RMB4,901 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended 2.64% lower Wednesday on selling pressure as investors took cues from lackluster demand in the cash market, weak vegetable oil prices on China's Dalian Commodity Exchange and a sharp fall in crude oil prices. The benchmark October CPO contract on Bursa Malaysia Derivatives ended MYR94 lower at an eight-day low of MYR3,466 a metric tonne.