December 19, 2008
CBOT Soy Outlook on Friday: Lower on bearish outside influences
A rise in the U.S. dollar and falling crude oil prices are expected to drag Chicago Board of Trade soybean futures 7 to 12 cents per bushel lower at the start of Friday's day session.
In overnight electronic trading, January soybeans dropped 9 cents to US$8.60 1/2. March soybeans sank 9 1/2 cents to US$8.65.
Tumbling crude oil prices are a bearish influence on soybeans because funds often trade in a basket of commodities and because biodiesel is made from soyoil, analysts said. A firm dollar weighs on commodities because it gives foreign countries less buying power, they said.
The steady pace of U.S. soy export sales provides some underlying support, although the weak outside markets are a bigger factor, analysts said. As of Dec. 11, 15 weeks into the soybean marketing year, total export commitments were already 69% of the U.S. Department of Agriculture's target for the year.
"Demand may be decent but outside influences point lower," Country Hedging said in a market comment.
CBOT soybeans closed higher Thursday, but the upside was limited by bearish outside markets, a technical analyst said. Soybean bears have the near-term technical advantage, he said.
The next upside price objective for the bulls is to push and close March soybeans above psychological resistance at US$9.00, the analyst said. The next downside price objective for the bears is pushing and closing prices below psychological support at US$8.00, he said.
First resistance for March soybeans is seen at this week's high of US$8.82 and then at US$8.90. First support is seen at Thursday's low of US$8.59 and then at US$8.50.
"Soybeans should open lower this morning, after failing to take out recent highs on this week's rally," Farm Futures analyst Bryce Knorr said. "Open interest remains modest in January options, which stop trading today. January stopped trading overnight just above the US$8.60 strike, which has the most open interest between US$8 and US$9."
Market participants continue to watch weather in the Southern Hemisphere amid concerns about dryness in Brazil and Argentina. Expectations for "fairly widespread showers in some of the drier areas" are a bearish influence on CBOT soybeans, said Don Roose, president of U.S. Commodities.
Scattered thunderstorms and cooler weather should move into Argentina during the weekend, helping to ease stress to developing crops, private weather firm DTN Meteorlogix said. Brazil's Rio Grande Do Sul area should see hotter and mostly dry weather until a cold front arrives Monday or Tuesday, the firm said.
Early indications suggest that showers associated with the front in Brazil early next week will be only light, Meteorlogix said. However, "there appears to be a good chance that everyone elsewhere will get needed rain early next week," the firm said in a forecast.
In China's major producing areas, soybean prices were stable in the week to Friday, as some processing plants resumed production. Farmers were more willing to sell with processing plants restarting purchases as soybean oil prices started to stabilize, China National Grain and Oils Information Center quoted the Ministry of Agriculture as saying.
China's soybean futures traded on the Dalian Commodity Exchange settled slightly higher Friday. The benchmark May 2009 soybean contract settled RMB16 higher at RMB3,063/tonne, or up 0.5%.