July 17, 2009

 

CBOT Soy Outlook on Friday: Up 7-10 cents in short-covering bounce

 

 

Chicago Board of Trade soybeans are expected to move higher on Friday's open on short-covering following Thursday's sharp losses, traders said.

 

Soybeans are called 7 to 10 cents higher. In overnight trade, August soybeans were up 10 cents to US$9.86 per bushel and November soybeans were up 10 cents to US$9.00.

 

August soyoil was up 62 points to 34.24 cents per pound and August soymeal was up US$3.10 to US$312.10 per short tonne.

 

About the only reason for prices to climb is that the market is oversold after recent losses, traders and analysts said. Other factors, including weaker crude oil and a stronger dollar, would seem to pressure the market, they said.

 

"The outsides are pointing lower. Weather is bearish. Maybe it's just evening up ahead of the weekend," said Vic Lespinasse, an analyst with grainanalyst.com.

 

The November contract on Thursday settled at a three-and-a-half-month low closing price, and a technical analyst said recent trade suggests a "major market top" is in place.

 

Weather is a key bearish factor for both the corn and soybean markets, as moderate temperatures and adequate rainfall pose little or no threat to the crop.

 

The soy market took a hit psychologically Thursday when China announced it would sell some of its soybean supply next week, analysts said.

 

Benson Quinn Commodities analyst Kim Rugel said in a market commentary that the market is overpriced compared to corn. During the past couple years the corn to soybean ratio has been close to 2.0:1, but since the June 30 report it has pushed out as wide as 2.81:1, Rugel said.

 

"This wide ratio will weigh on demand with end users switching to cheaper feed alternatives," the analyst said.

 

The next upside price objective for the bean bulls is to push and close November prices above solid technical resistance at this week's high of US$9.38 a bushel, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.50 a bushel.

 

First resistance for November soybeans is seen at US$9.00 and then at Thursday's high of US$9.13, the technical analyst said. First support is seen at the July low of US$8.81 1/4 and then at US$8.75.

 

In international markets, soybean futures traded on the Dalian Commodity Exchange settled lower Friday with the market digesting government sales, but there were signs of a milder fall to come due to bargain-hunting.

 

The benchmark May 2010 soybean contract settled down RMB26 a metric tonne at RMB3,462/tonne.

 

Also, crude palm oil futures on Malaysia's derivatives exchange ended 5.1% higher Friday as investors covered short positions on a rebound in prices and spillover support from soyoil, trade participants said.