October 30, 2007

 

CBOT Soy Outlook on Tuesday: Down 7-9 cents; profit taking, outside markets

 

 

Soybean futures on the Chicago Board of Trade are seen starting Tuesday's day session on the defensive, setting back on corrective selling attributed to weakness in outside markets overnight.

 

The U.S. dollar index is higher, and crude oil and metals markets are lower across the board.

 

CBOT soybean futures are called to start the session 7 to 9 cents lower.

 

In overnight e-CBOT trading, November soybeans were 9 cents lower at US$10.02 per bushel, and January soybeans were 9 cents lower at US$10.19 3/4.

 

A quiet news front is keeping attention on outside markets once again, with a bounce in the U.S. dollar and declines in inflationary markets expected to send weakness filtering through the soy complex in early action, analysts said.

 

Profit taking is seen as a featured attraction after recent gains, with end of the month position squaring, and traders looking to trim some risk ahead of Wednesday's Federal Reserve decision on rates attracting selling pressure, analysts added.

 

Meanwhile, positioning ahead of Wednesday's first notice day for November futures is seen as an underlying feature as well, with sharply lower palm oil futures expected to lend pressure to soyoil and soybeans also, traders said.

 

Otherwise, the market has little fresh fundamental news to digest, with Monday's harvest data from U.S. Department of Agriculture in line with estimates.

 

A technical analyst said market bulls have regained fresh upside technical momentum recently. The next upside price objective for January soybeans is to push and close prices above solid technical resistance at the contract high of US$10.33. The next downside price objective is closing prices below major psychological support at US$10.00.

 

First resistance for January soybeans is seen at US$10.33 and then at US$10.40. First support is seen at Monday's low of US$10.14 3/4 and then at US$10.00.

 

USDA reported that 84% of the U.S. crop was harvested as of Sunday, up from the 82% last year, but just shy of the five-year average of 85%. Analysts had expected the harvest to be 80% to 85% complete.

 

In Iowa, 88% of the crop has been harvested, compared to 94% last year and the average of 97%. In Illinois, 95% of the crop has been harvested, above the 87% combined last year and the average of 90%. In Minnesota, 93% of the crop was harvested, compared to 99% last year and the average of 95%. In Indiana, the cutting pace was 91% complete, compared to 69% in 2006 and the average of 85%.

 

Overall the harvest numbers don't strike any significant concerns, but Iowa remains behind a bit, and the trade will have to keep a close eye on cold weather, said Mike Zuzolo, senior analyst with Risk Management Commodities Inc. in Lafayette, Ind.

 

The market must be watchful of a hard freeze, as that could produce field losses from pods shattering if temperatures fall below freezing for more than a few hours, he added.

 

The DTN Meteorlogix Weather Service forecast said dry conditions are on tap for Tuesday, with dry or only a few light showers Wednesday in the western U.S. Midwest. Conditions are expected to remain mostly dry Thursday. Temperatures will average well above normal Tuesday, above normal Wednesday and Thursday.

 

In the eastern Midwest, dry conditions are seen for Tuesday, with dry or only a few very light showers Wednesday. Dry conditions are seen for Thursday. Temperatures will average above normal.

 

In Brazil, there is a chance for moderate to heavy rains through southern soybean areas during the next 3-5 days, maintaining high available soil moisture for soybeans. Northern soybean areas may see showers redevelop later in this five-day period. The western Bahia soybean areas continue to be drier and somewhat warmer.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled mostly lower Tuesday on concerns over a possible change in government policy on vegetable oil prices. There have been rumors that China is considering cutting import tariffs for vegetable oils to curb rising prices. The benchmark May 2008 soybean contract settled RMB35 lower at RMB4,406 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange fell Tuesday on profit-taking and selling pressure after two days of sharp gains, despite a strong export outlook, market participants said. The benchmark January CPO contract on Bursa Malaysia Derivatives ended MYR48 lower at MYR2,862 a metric tonne after reaching an intraday high of MYR2,885/tonne.