October 31, 2007

 

CBOT Soy Outlook on Wednesday: Up 4-6 cents; following inflationary markets

 

 

Chicago Board of Trade soybean futures are expected to start Wednesday's day session on firmer footing, continuing to take its cue from higher outside inflationary markets, analysts said.

 

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

 

CBOT soybean futures are called to start the session 4 to 6 cents higher.

 

In overnight e-CBOT trading, November soybeans were 7 3/4 cents higher at US$9.99 3/4 per bushel, and January soybeans were 6 1/4 cents higher at US$10.15 1/2.

 

Consolidation is expected Wednesday as traders wait for the Federal Reserve to release its decision on interest rates Wednesday afternoon, said Arlan Suderman, analyst with Farm Futures in a morning market report.

 

With a quiet news front and harvest wrapping up, the market remains focused on the inflationary bubble, watching what the Fed does with interest rates, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

"The decision will be key for the future of the U.S. dollar, key for inflation and subsequently key for the markets," Roose added.

 

Analysts anticipate the Fed will cut interest rates by 1/4 basis point.

 

Meanwhile, analysts say with the harvest drawing to an end, end users are underneath the market providing support and with producers not aggressively selling, futures are finding some underlying strength.

 

Technical activity will play a key role as well, with lower-than-expected deliveries versus the November contract seen adding some strength also, traders said.

 

A technical analyst said no serious chart damage occurred on Tuesday's setback, but strong follow-through selling on Wednesday could produce some chart damage and would raise the specter of a bearish double-top reversal pattern forming on the daily bar chart. However, market bulls still have the near term technical advantage. 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 Tuesday's high of US$10.22 3/4 and then at US$10.33. First support is seen at Tuesday's low of US$10.08 and then at US$10.00.

 

November soybean deliveries totaled 355 lots. Analysts surveyed by Dow Jones Newswires anticipated deliveries in the range of 1,000 to 4,000 lots. A customer account at Astro Division of UBS Securities LLC was the primary issuer of 329 lots, with the house account at Rosenthal Collins LLC the primary stopper of 209 lots. The last trade date assigned was October 10.

 

The DTN Meteorlogix Weather Service forecast said mainly dry conditions are forecast for the western U.S. Midwest Wednesday through Friday. Temperatures will average above normal Wednesday and Thursday, and near normal Friday. In the eastern Midwest, mainly dry conditions are expected Wednesday through Friday. Temperatures will average near to 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, Meteorlogix reports.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled mostly lower Wednesday on the weak performance of their counterparts at CBOT Tuesday. The benchmark May 2008 soybean contract settled RMB23 lower at RMB4,383 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended mostly higher Wednesday on strong speculative buying toward the end of the day's trading, despite export volumes being below expectations, market participants said. The benchmark January CPO contract on Bursa Malaysia Derivatives ended MYR18.