November 20, 2007

 

CBOT Soy Outlook on Tuesday: Flat, down; Asian drop Vs outsides, demand

 

 

Chicago Board of Trade soybean futures are seen starting Tuesday's day session with a steady to lower undertone, as overnight weakness in Asian markets applies pressure while supportive outside market influences and export demand underpins, analysts said.

 

The U.S. dollar index is lower, crude oil and metal futures are higher.

 

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

 

In overnight e-CBOT trading, January soybeans were 5 1/2 cents lower at US$10.65 per bushel, and March soybeans were 5 1/4 cents lower at US$10.82.

 

Rumors of China lowering their Value Added Tax and import taxes coupled with weakness in their stock markets sent China futures tumbling to limit down levels overnight, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

The Asian weakness should apply some short term pressure to prices, but when you look at the potential tax measures they are supportive longer term for U.S. exports and that should limit losses, Roose added.

 

Meanwhile, weakness in the U.S. dollar and strength in outside inflationary markets such as crude oil and metal futures are expected to lend support to keep a floor under prices as well, analysts said.

 

Consistent export demand from China continues to support the market as well, with more daily sales reported by the U.S. Department of Agriculture, analysts added.

 

USDA announced Tuesday private exporters reported the sale of 107,000 metric tonnes of soybeans for delivery to China in the 2007-08 marketing year. Additionally, 20,000 tonnes of U.S. soyoil were sold to China for delivery in the 2007-08 by private exporters, USDA reported.

 

A technical analyst said the next upside price objective for January soybeans is to push and close prices above major psychological resistance at US$11.00 a bushel. The next downside price objective is closing prices below strong support at US$10.49 1/2, which is the bottom of an upside price gap on the daily bar chart.

 

First resistance for January soybeans is seen at US$10.80 and then at the contract high of US$10.88. First support is seen at Monday's low of US$10.70 and then at US$10.62 1/4.

 

In overseas markets, soybean futures on the Dalian Commodity Exchange settled sharply lower Tuesday, following a tumble in CBOT soybeans. Most contracts hit limit-down during the session as negative sentiment in the stock market spilled over into soybeans. The benchmark September 2008 soybean contract settled RMB149 lower at 4,397 a metric tonne.

 

Crude palm oil futures traded on Malaysia's derivatives exchange ended lower Tuesday, despite a rise in exports, due to lower crude oil and soyoil prices, trade participants said. The benchmark February contract on Bursa Malaysia Derivatives ended MYR20 lower at MYR2,930 a metric tonne.

 

The DTN Meteorlogix Weather Service said in Brazil episodes of scattered showers and thundershowers are on tap from northern Mato Grosso Do Sul northward Tuesday through Thursday. Temperatures will average near to above normal Tuesday, above normal Wednesday and Thursday.

 

Dry conditions with the potential for only a few thunderstorms in northern areas are on tap for Friday. Widespread rain or thunderstorms are seen for the weekend. This activity looks to be moderate to heavy and may tend to favor Parana and Mato Grosso Do Sul. Temperatures will average above normal Friday, and cooler during the weekend, Meteorlogix said.

 

In other news, Indian exporters have already contracted to sell around 2.0 million metric tonnes of soymeal from the new crop harvest for which started last month, a senior industry executive said Tuesday. The executive said most of the deals for soymeal have been contracted at an average price of US$330-US$340 a tonne, cost and freight basis, which is far more than previous season.