August 17, 2009

CBOT Soy Outlook on Monday: Down 20-30 cents; Midwest rains benefit crops

Soybean futures on the Chicago Board of Trade are seen opening 20 cents to 30 cents lower Monday, with widespread rains across the U.S. Midwest over the weekend expected to boost crop development.

In electronic trading, September soybean futures were down 32 1/2 cents to US$9.92 a bushel, and November futures were down 25 1/4 cents to US$9.56 1/4.

Substantial rains soaked central areas of the Corn Belt over the past 24 hours, including drier areas of Illinois and Indiana, according to a report from private meteorologist T-storm Weather LLC. Most of the region is expected to receive 1 to 2 inches of rain this week, which "is viewed as very favorable for crops and should diminish dryness in critical areas," T-storm's report said.

"The weather over the weekend looked great," said David Smoldt, vice president of operations for FCStone LLC, in Des Moines, Iowa. "It's been very good weather for putting the finishing touches on the bean crop. It looks like we're going to have real good (weather) through the end of August, with no extreme heat."

T-storm expects "seasonally mild" weather for the Midwest early this week followed by cooler temperatures from Thursday through Sunday. While this will prevent crop stress, it "continues sluggish crop development," T-storm said.

The favorable growing outlook reinforces bearish sentiment in the soybean market in the wake of the U.S. Department of Agriculture's crop production report last week, which pegged this year's soybean harvest at a record 3.199 billion bushels.

The USDA's forecast soybean production would be an 8% increase from 2008's harvest.

Market technicians see the potential for further downside for soybean futures. There's "not much in the way of support until the US$9.40 level" for the November contract, according to a report from Farm Futures Daily.

A reversal week in soybeans last week, combined with other technical indicators, "represents compelling evidence that the uptrend is over" in soybeans, Barclays Capital said in a Friday report.