July 24, 2009

CBOT Soy Outlook on Friday: Down slightly on pullback, weak basis

Soy complex futures at the Chicago Board of Trade are called to open slightly lower Friday on a corrective pullback from Thursday's gains.

Soybeans are called to open 2 to 5 cents lower. Meal is called down US$2.00 to US$4.00 and soybean oil is called to open up 15 to 25 points.

Weaker U.S. cash basis levels for soybeans after the close Thursday have added a bearish element to the futures market Friday morning, said Don Roose of U.S. Commodities in Des Moines. "That weak cash basis has the futures market anchored this morning," he said.

Corn Belt weather remains a key bearish factor for the soybean complex futures. There is no threatening weather in the Corn Belt forecast for the next 10 days, said Roose. The past 24 hours saw rain and showers through the eastern Corn Belt and mostly dry in the western portion. The forecast calls for mostly dry conditions Friday, with a few scattered showers and temperatures near normal.

China will attempt to sell more soybeans next week, according to an official Chinese government website. The government will try to sell 500,000 metric tonnes of soybeans. This week, an attempted sale of the same amount failed due to an asking price that was too high. Roose said China will continue to be an important market factor for soybeans in the coming weeks, as traders watch for demand coming from China and keep an eye on the nation's government grain auctions.

The soybean complex "is in a technical market right now," said Roose. He said soybeans had become technically oversold and was due for a corrective bounce like that which was seen Thursday.

Technically, November soybeans on Thursday closed solidly higher and nearer the session high on short covering and some bargain-hunting buying. A bullish weekly high close on Friday would provide the bean bulls with some fresh upside technical momentum and could also produce a bullish upside "breakout" from the recent trading range on the daily chart.

Prices are still in a six-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 Thursday's high of US$9.36 and then at this week's US$9.40. First support is seen at US$9.25 and then at US$9.15.