August 16, 2006

 

CBOT Soy Outlook on Wednesday: Seen up 1-3 cents, e-CBOT, oversold

 

 

Soybean futures at the Chicago Board of Trade are poised to start Wednesday's day session on firmer footing, in tune with overnight action, as the market garners underlying support from oversold conditions.

 

Soybeans are called to open 1 to 3 cents higher.

 

In e-CBOT trade, November soybeans were 2 1/2 cents higher at US$5.71 3/4 per bushel.

 

The market is set to open higher, with oversold conditions and seemingly exhausted speculative fund selling opening the door for an overdue price correction, analysts said.

 

However, continued favorable weather for Midwest crops is making it difficult to attract aggressive buyers, with ample nearby supplies a limiting factor to upside movement as well, said a CBOT commission house broker.

 

The fundamentals of the market are unchanged, and many traders are waiting to see what speculative funds do in the absence of fresh directive news. Tuesday's session produced a choppy atmosphere, and with analysts already penciling in the potential maybe a 1-2 bushel per acre increase in yields based on August weather, sideways action may be common in the face of oversold conditions, analysts added.

 

Meanwhile, talk of U.S. soybean export prices being more competitive with Brazil following the recent drop in values coupled with talk of lower Brazilian acreage for the next growing season is providing light support to limit downside pressure, a CBOT floor analysts said.

 

A market technician said bearish momentum still has technical command, with serious near-term chart damage inflicted recently. The next downside price objective for November soybeans is solid technical support at US$5.50. It will take a close above technical resistance at US$5.94 - meaning filling last week's big downside price gap on the daily bar chart - to provide any fresh upside technical momentum.

 

First resistance for November soybeans is seen at US$5.75 1/2 - and then at US$5.80. First support is seen at US$5.64 - this week's low - and then at US$5.60.

 

The DTN Meteorlogix forecast said U.S. and European models are in fair to good agreement. Weak upper level troughs over or near the Midwest will lead to showers during the next 5 days. The Midwest may be cooler and drier during days 6-10 when the ridge shifts westward.

 

Episodes of scattered showers and thunderstorms will continue to favor filling corn and soybeans in the western Midwest during the 5 day period, Meteorlogix reports. In the eastern Midwest, scattered thunderstorms during Friday into Saturday will help to maintain favorable conditions for filling crops.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Wednesday. Spot cash soybean bids were down 5 cents in Cedar Rapids, Iowa, up 7 cents in Peoria, Illinois, and up 7 cents in St. Louis, Mo., according to cash sources Wednesday. Rotterdam soybeans were higher and soymeal prices were mixed. European vegoils were mixed.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled higher Wednesday, following e-CBOT gains, said an analyst. The most active January 2007 contract settled RMB14 higher at RMB2,536 a metric tonne, after trading between RMB2,524 and RMB2,544/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended sharply lower Wednesday on concerns that a biodiesel-driven market rally to two-year highs may be over. The benchmark November contract ended at MYR1,627 a metric tonne, down MYR26 from Tuesday.