July 22, 2009

CBOT Soy Outlook on Wednesday: Steady openings; two-sided trade likely

Soy complex futures at the Chicago Board of Trade are called to open near steady price levels across the board Wednesday morning. However, the bearish weather in the U.S. Corn Belt will limit buying interest, said an anlyst. Also, lower crude oil and U.S. stock index futures prices Wednesday morning are bearish outside forces for the soy complex.

"You are probably going to see two-sided trade and mixed price action today," said Brian Hoops, market analyst with Midwest Market Solutions. He said rallies will likely be capped by the good growing weather in the Corn Belt and will be short-covering rallies based upon technicals.

The failure of November soybeans to score a fresh low this week or last week is somewhat encouraging to the bulls and could also prompt some short covering heading into the end of the month, said Hoops. He added that soybean meal could be the price leader on rallies, while soybean oil will likely be the complex laggard in the near term.

Scattered showers and thundershowers fell over the Corn Belt the past 24 hours. More of the same is in the forecast, especially for the eastern Corn Belt. Temperatures have been and will continue to be normal to below normal in the region.

The specter of China soon auctioning its soybean stocks on Thursday is also a negative fundamental in the soy complex futures. The government will sell 500,000 metric tonnes of reserve soybeans in the northeast producing areas Thursday. Traders believe the price set by the government will be much higher than current local prices.

Soybean futures on the Dalian Commodity Exchange in China losed higher Wednesday as traders set up long positions in expectations the government will not lower soybean sales prices at the government auction Thursday.

Technically, November soybean prices are in a five-week-old downtrend on the daily bar chart. The next upside price objective for the bean bulls is to push and close November prices above solid technical resistance at US$9.75 a bushel. The next downside price objective for the bears is pushing and closing prices below solid technical support at the July low of US$8.81 1/4 a bushel. First resistance for November soybeans is seen at Tuesday's high of US$9.26 and then at this week's high of US$9.40. First support is seen at Tuesday's low of US$8.95 1/2 and then at US$8.81 1/4.