August 5, 2009

 

CBOT Soy Outlook on Wednesday: Up 8-10 cents; technical strength, heat concerns

 

 

Chicago Board of Trade soybeans are poised to open higher Wednesday on continued technical strength and concern about heat in the U.S. Midwest.

 

Soybeans are called 8 to 10 cents higher. In overnight trade, August soybeans were up 11 cents to US$11.76 per bushel and November soybeans were up 11 1/4 cents to US$10.42 3/4.

 

September soymeal was up US$3.50 to US$342.80 per short tonne, and September soyoil was down 4 points to 37.56 cents per pound.

 

The trade is nervous about hotter weather descending on the Midwest over the next several days. The crop is in an important stage of development and yields could suffer if hot, dry weather lasts for an extended period.

 

But DTN Meteorlogix said in a forecast that "hot weather late this week and over the weekend is not expected to last long enough to put much stress on crops." The forecast calls for episodes of scattered showers and thunderstorms through Friday and again early next week in the Midwest.

 

Hot weather accompanied by ample rain would actually be beneficial to the crop, which is behind schedule, analysts say.

 

The trade will be closely monitoring weather forecasts for the weekend and beyond over the next couple days, with an eye on any changes in the precipitation forecast, a trader said.

 

Technically the market continued to display strength overnight.

 

"If beans or corn take out this week's highs, they could be off to the races," a trader said.

 

The market does appear poised to set a new high for the week, as the November contract closed overnight above the open outcry high of US$10.41. The trader said bulls are targeting US$10.50, and that if the market breaks through there, the November contract could be headed toward US$11.

 

The next upside price objective for the bean bulls is to push and close November prices above the June 18 swing high at US$10.57 per bushel, a 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. First support is seen at US$10.15 and then at US$10.00.

 

Outside markets are not seen as a factor Wednesday morning, but the trade will be watching crude oil after a government report is released this morning, analysts said.

 

In international markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Wednesday amid overall bullish sentiment for commodities across the board.

 

The benchmark May 2010 soybean contract settled RMB13 a metric tonne higher, or 0.3%, at RMB3,733/tonne.

 

China finally managed to sell some soybeans from its reserves Wednesday, but analysts say the volume is too low to have much impact on the market.

 

The government sold 4,900 metric tonnes of soybeans in northeast and northern major producing areas after failing twice in the weekly sales due to high prices.

 

Also, Crude palm oil futures on Malaysia's derivatives exchange extended gains Wednesday as investors covered their short positions, while tight palm oil supply was positive for prices, trade participants said.