November 4, 2008
CBOT Soy Outlook on Tuesday: Called higher after overnight gains
Soybean futures on the Chicago Board of Trade are expected to make modest gains when Tuesday's pit trading opens, supported by higher crude oil, a lower U.S. dollar and a bullish private crop estimate.
CBOT soybean futures are called 4-6 cents higher.
In overnight electronic trading, November soybeans gained 6 cents per bushel to US$9.34 1/4. January soybeans added 4 1/2 cents to US$9.42. December soymeal gained 40 cents to US$275.60 per short tonne, while December soyoil added 6 points at 34.83 cents per pound.
A total of 129 contracts were delivered against the CBOT November soybean futures contract. A customer account at MF Global issued 84 lots, with a customer account at Tenco the primary stopper with 99 lots. The last trade assigned was Oct. 22.
Commodity risk management firm FC Stone on Monday estimated the 2008-09 marketing-year U.S. soybean crop at 2.916 billion bushels, with a yield of 39.2 bushels per acre.
FC Stone's crop and yield estimates are below the U.S. Department of Agriculture estimate of 2.938 billion bushels, with a yield of 39.5 bushels per acre. The USDA is scheduled to release updated estimates Nov. 10 at 8:30 a.m. EST.
Slowing global trade has pressed ocean freight rates are near seven-year lows, but soybean exports remain "impressive" with the week ending Oct. 30 the largest shipment in two years, said Arlan Suderman, Farm Futures market analyst.
Though "positive" macro economic developments have occurred in the past two weeks, "it will likely be some time before we crawl out of this mess created by the sub-prime mortgage mess and we still can't rule out fresh lows," Suderman said. "That said, both the financial and commodity markets showed signs of bottoming in October."
"On the other hand, recent strength in commodity prices is producing an increased supply of grain and oilseeds on the cash markets," he added. "Farmers are rewarding recent strength with modest sales, causing increased movement to interior markets, as well as down the Mississippi River to Gulf terminals. That in turn is softening basis levels a bit."
Soybean bears aim to close January soybeans below the US$9 psychological support level, a market technician said, pegging first support at Monday's low of US$9.19 1/4.
Despite the gains posted yesterday, "bearish 'outside markets' - a stronger U.S. dollar and sharply lower crude oil prices - did limit the upside in beans," the technician said.
The bulls must close above major psychological resistance at US$10 a bushel, he said, marking first resistance at Monday's high of US$9.57 and then last week's high of US$9.74.
The U.S. soybean harvest was 86% complete, up from 76% last week but down from the average of 89%, the USDA said. Analysts had expected harvest to be 84% to 87% complete.
The soybean harvest numbers may put a little pressure on the market, particularly with this week's weather opening the door for good harvest activity, said Terry Reilly, analyst with Citigroup in Chicago.
Warm harvest weather is expected across the U.S. Midwest through the weekend, with temperatures through Wednesday ranging from 45-77 degrees Fahrenheit, according to DTN Meteorlogix.
A few light showers will develop in the western portion of the region and then move east later in the week, the private forecasting firm said. Scattered showers and maybe flurries may be seen in the region's northern portion on Saturday.
In global trading news, China's soybean futures traded on the Dalian Commodity Exchange settled lower Tuesday, tracking a fall in soybean meal prices as the market remains concerned melamine contamination may have expanded to the feedmeal sector.
The benchmark May 2009 soybean contract settled RMB41 lower at RMB3,348 a metric tonne, or down 1.2%.
As the melamine contamination scare expands beyond milk, industry experts are concerned it may have been mixed with feedmeal to create the appearance of being protein-rich.
Melamine is an industrial chemical normally used to make plastics and can lead to severe kidney problems in humans if ingested in large amounts.
Crude palm oil futures on Malaysia's derivatives exchange fell 7.2% on Tuesday amid profit-taking, weaker crude oil and talk that India is likely to hike its import tariff on vegetable oils, trade participants said.
The benchmark January contract on Bursa Malaysia Derivatives ended MYR88 lower, at MYR1,578 a metric tonne, erasing a large part of gains made on Monday.
In Brazil, some rain is aiding the environment for planting and developing soybeans through northern Mato Grosso, while weather is "generally favorable" through Parana and "drier weather would benefit fieldwork in Rio Grande do Sul," DTN said.
Meanwhile, in Argentina, "beneficial rains" are improving soil moisture conditions for crop planting, the forecasters add.