September 25, 2007

 

CBOT Soy Outlook on Tuesday: Down 2-3 cents; lacks fresh supportive spark

 

 

Soybean futures on the Chicago Board of Trade are expected to start Tuesday's session lower, with a lack of fresh news to buoy bulls opening the door for profit taking to emerge.

 

CBOT soybean futures are called to start the session 2 to 3 cents lower.

 

In overnight e-CBOT trading, November soybeans were 2 1/4 cents lower at US$9.76 1/2, and January soybeans were 2 1/2 cents lower at US$9.92.

 

The weight of the fall harvest is applying pressure to prices in the absence of fresh bullish news, with end of the month position evening a feature as well, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

Broad based weakness across commodity markets in general Tuesday morning is expected to aid the lower tone as prices consolidate after a rallying period during the past month, analysts said.

 

It's starting out like a national down day across commodities, Roose added.

 

Meanwhile, higher crop ratings reported Monday may add some weakness, as the ratings increase could be a signal that yields could be bigger than expected, Roose said.

 

Nevertheless, the underlying theme of the market remains bullish, as the need to buy additional soybean acres in South America and in the U.S. next year amid tightening stocks and growing demand remain a crutch for prices, analysts added.

 

A technical analyst said prices are still in a steep uptrend from the August low, with no strong technical signs of a market top being in place. The next upside price objective for November soybeans is to push and close prices above major psychological resistance at US$10.00 a bushel. The next downside price objective is closing prices below support at last week's low of US$9.53.

 

First resistance for November soybeans is seen at Monday's high of US$9.85 1/2 and then at the contract high of US$9.96 1/2. First support is seen at Monday's low of US$9.71 1/2 and then at US$9.60.

 

U.S. Department of Agriculture reported that 12% of the U.S. crop was harvested as of September 23, above the average of 11% and at the upper end of analysts' expectations of 8%-12%. The crop is maturing rapidly with 76% dropping leaves, above the average of 68%.

 

In Illinois, 22% of the crop has been harvested, compared to 4% last year and the 10% average. In Iowa, 11% of the crop has been combined, slightly above the average of 10%.

 

The USDA reported that 58% of the crop was in good-to-excellent condition, up two percentage points from last week.

 

In Illinois, 55% of the crop was in good-to-excellent condition, unchanged from last week. In Iowa, 74% of the crop was in good-to-excellent condition, also unchanged from the previous week.

 

The DTN Meteorlogix Weather Service forecast said Brazil's Mato Grosso state continues hot and dry. Any significant rainfall during the next 7-10 days will be confined to Rio Grande do Sul and southern Parana. Hot dry weather will continue over central Brazil. There is no sign of any significant rainfall developing in northern Mato Grosso until possibly the latter part of the first week of October.

 

In the U.S. Midwest, showers early this week may cause delays to the harvest but nothing major is expected.

 

In other news, China will increase its state reserves for soybeans and edible vegetable oil to a proper level to guarantee the market supply, the State Council said in a statement published late Monday. The statement, a wrap-up of the government's earlier policies to boost oilseeds production, also said China will tightly control exports of oilseeds and vegetable oil.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled mixed Tuesday, and analysts said the correction may continue in the short term after prices set record highs earlier this month at above RMB4,100 a metric tonne. The benchmark May 2008 soybean contract settled RMB3 higher at RMB4,071/tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended lower Tuesday on profit-taking, exports estimated in line with expectations and weaker crude oil, market participants said. The benchmark December contract at the Bursa Malaysia Derivatives ended MYR20 lower at MYR2,655 a metric tonne after reaching an intraday low of MYR2,648/tonne.