August 4, 2009

 

CBOT Soy Outlook on Tuesday: Lower; profit-taking after Monday rally

 

 

After soaring on Monday, Chicago Board of Trade soybean futures are expected to open lower Tuesday in a modest pullback amid profit-taking and weaker outside markets, analysts said.

 

Soybeans are called 6 to 8 cents lower. In overnight trade, August soybeans were down 6 1/2 cents to US$11.67 per bushel and November soybeans were down 5 1/2 cents to US$10.25.

 

August soyoil was down 54 points to 37.00 cents per pound and August soymeal was down US$2.10 to US$365 per short tonne.

 

The market rallied Monday to its highest level since June 19 amid a much-weaker dollar and concerns about oncoming heat in the U.S. Midwest. The surge was accelerated by technical buying, and soybeans were just one of many commodities to rally.

 

"Today, however, is turnaround Tuesday, and we can reasonably expect to see these same commodities that rose so materially and so readily yesterday retrace a bit today," Dennis Gartman wrote in The Gartman Letter. "But, that shall likely be a retracement and little else."

 

The dollar is firm and other outside markets are weaker, analysts said. The heat is still seen as a concern, but some traders said it would have to linger for an extended period to seriously harm the crop.

 

The U.S. Department of Agriculture said in a Monday crop progress report that the portion of the soybean crop rated good-to-excellent was 67% as of Sunday, same as the prior week. Traders had expected conditions to drop by 1-2 percentage points.

 

The crop remains behind schedule, however. The USDA said that 76% of the crop was in the blooming stage, up from 63% the prior week but down from the average of 86%. Last year, 63% of the crop was in the blooming stage.

 

In other news, Commodity brokerage firm FCStone on Monday said it estimated 2009 soybean production at 3.247 billion bushels, below the USDA's July estimate of 3.26 billion.

 

FCStone pegged the average soybean yield at 42.4 bushels, down from the USDA's current estimate of 42.6 bushels. A floor trader said the FCStone estimate is "at the lower end of what the trade has been thinking."

 

There were 2,723 soyoil deliveries against the August futures contract, but no soybean or soymeal deliveries.

 

Technically, the near-term trend "is clearly up, but markets that move this far this fast are always vulnerable to consolidation and correction," a technical analyst said.

 

The next upside price objective for the bean bulls is to push and close November prices above the June 17 swing high at US$10.57, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$10.00 a bushel.

 

First resistance for November soybeans is seen at Monday's high of US$10.42 1/2 and then at US$10.57, the technical analyst said. First support is seen at US$10.29 and then at US$10.00.

 

In other markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Tuesday, boosted by the steep rise in the CBOT.

 

The benchmark May 2010 soybean contract settled RMB49 higher at RMB3,720 a metric tonne, up 1.3%.

 

Crude palm oil futures on Malaysia's derivatives exchange ended higher Tuesday due to tight supply amid rising festive demand, said trade participants.

 

The benchmark October CPO contract on the Bursa Malaysia Derivatives ended MYR9 higher at MYR2,304 a metric tonne after trading in a MYR2,288-MYR2,345/tonne range.