November 28, 2005

  

CBOT Soy Outlook on Monday: Down 7-9 cents; downtrend intact

  

 

Chicago Board of Trade soybean futures are expected to extend the market's downtrend Monday, as bird flu concerns, technical weakness and favorable crop conditions in South America keep bearish momentum flowing, traders said.

 

Analysts call soybeans to open 7 to 9 cents per bushel lower.

 

In overnight electronic trade, January soybeans were 7 3/4 cents lower at US$5.46 1/2, January soymeal was US$2.00 lower at US$168.70 and January soyoil was 23 points lower at 21.05 cents per pound.

 

The market will take its lead from overnight action, with China soybean futures falling to limit down levels as the dominant issue of bird flu and its impact of China's import needs cast a bearish cloud over the market, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

Follow through selling from Friday's poor price action is seen keeping a defensive tone in the market, with the absence of any significant export demand on the radar leaving bullish traders without any fundamental justification to step in front of the declines.

 

However, futures have reached oversold levels and a light short covering bounce in a bear market is overdue, said a CBOT commission house broker. The 9-day relative strength index (RSI) for January soybeans was at 27.26 as of Friday's close. A RSI reading below 30.00 is considered oversold.

 

Market technicians said first resistance for January soybeans is seen at US$5.61-the top of Friday's downside price gap on the daily bar chart -  and then at US$5.66. First support is seen at US$5.50 and then at US$5.45.

 

The DTN Meteorlogix Weather Service said recent rain activity will maintain favorable conditions for early developing crops across Brazil and Argentina, except in the far southwest of Argentina where it may be a little too dry.

 

State-owned Taiwan Sugar Corp. will seek a cargo comprising 35,000 metric tonnes of U.S. No. 2 yellow corn and U.S. No. 2 yellow soybeans in a tender to be held Tuesday, a Taipei-based trader said Monday. TSC aims to buy 23,000 tonnes of corn and 12,000 tonnes of soybeans to be shipped either between Dec. 23 and Jan. 6 from the U.S. Gulf, or between Jan. 7 and Jan. 21 from the Pacific Northwest, the trader said.

 

On tap for Monday, the U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 10:00 a.m. CST (1600 GMT). Commodity Futures Trading Commission is scheduled to release its commitment of traders report 14:30 p.m. CST.

 

In overseas markets, China's Dalian Commodity Exchange soybean futures settled sharply lower Monday, as investors' confidence in the market was battered amid constant reports of bird flu outbreaks. Friday's decline in Chicago Board of Trade soybean futures also fueled a new round of selling in the local market. The benchmark May 2006 soybean contract gave up RMB72 to settle at RMB2,537 a metric tonne, after falling to RMB2,505/tonne, its lowest level since mid-February. The contract's intraday high was at RMB2,596/tonne.

 

Crude palm oil futures on the Bursa Malaysia Derivatives ended lower Monday, with the benchmark contract briefly touching a fresh two-month low, dragged down by steep declines in soyoil futures. The benchmark February CPO contract ended at MYR1,399 a metric tonne, down MYR20 from Friday, after moving between MYR1,396/tonne and MYR1,415/tonne.

 

Rotterdam soybeans and soymeal prices were lower, and European vegoils were flat to lower.