October 18, 2006

 

CBOT Soy Outlook on Wednesday: Down 3-5 cents; e-CBOT, overbought conditions

 

 

Chicago Board of Trade soybean futures are seen starting Wednesday's day session on the defensive, in line with overnight declines, as the market sets back from recent gains.

 

Soybean futures are called to open 3 to 5 cents lower.

 

In e-CBOT trade, November soybeans were 5 1/4 cents lower at US$5.95 1/4 and January was 5 3/4 cents lower at US$6.08 3/4 per bushel.

 

The market is set for a modest downward correction in prices amid overbought conditions and a lack of fresh support to underpin prices, analysts say.

 

The Relative Strength Index for the most active November futures stood at 74.5 at Tuesday's settlement. A RSI reading above 70.0 is considered overbought market conditions.

 

Futures are overdue for some consolidation, with the absence of early price support from neighboring grains and outside markets leaving futures without a crutch to lean on, said a CBOT floor analyst. However, speculative interest has been a key driver of market activity recently and any rekindled buying interest could quickly reverse the early weakness, he added.

 

The market has managed to gain solid upside technical momentum recently, with the November contract closing above strong psychological resistance at US$6.00 a bushel Tuesday, said a technical analyst. The next upside price objective is to close prices above solid chart resistance at US$6.15, with the next downside price objective closing prices below solid support at US$5.75, he added.

 

First resistance for November soybeans is seen at Tuesday's high of US$6.03 1/2 and then at US$6.10. First support is seen at US$5.95 and then at Tuesday's low of US$5.91.

 

The DTN Meteorlogix weather forecast says wet conditions in the U.S. Midwest may cause further harvest delays this week but mostly for the southern and eastern locations.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Wednesday. Spot cash soybean bids were up 12 cents in Cedar Rapids, Iowa, down 2 cents in Central Ill., and down 4 cents in St. Louis, Mo., according to cash sources Wednesday.

 

In demand news, a group of Philippine feed millers and livestock producers has bought 45,800 metric tonnes of Indian and Argentine soymeal and 5,400 tonnes of Argentine soybeans for Dec. 15 to Jan. 15 delivery, traders said.

 

Rotterdam soybeans and soymeal were mostly higher. European vegoils were higher.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled mostly lower Wednesday on a downward correction, analysts said. The benchmark January 2007 contract fell RMB3 to settle at RMB2,578 a metric tonne, after trading between RMB2,565 and RMB2,595/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended higher Wednesday in a continuation of a two-week-old uptrend fueled by speculative buying amid a positive view of supply and demand for the rest of the year, traders said. The benchmark January CPO contract ended at MYR1,612 a metric tonne, up MYR14 from Tuesday, after touching high of MYR1,617/tonne.