December 27, 2007

CBOT Soy Outlook on Thursday: Steady-weak start seen as pullback expected

A modestly weaker start is seen in soy complex futures at the Chicago Board of Trade Thursday as a pullback following Wednesday's sharp rally is expected.

Most-active March soybean futures are called to open 1-3 cents a bushel weaker. E-cbot trade was down slightly in overnight action, lending a likely softer tone to early dealings. January soybeans slipped 3/4 cent to US$12.20 and March fell 1 cent to US$12.38 1/2.

After Wednesday's rally solidly over US$12, market watchers said it wouldn't be surprising to see the market pull back and consolidate. Even if soybeans do retreat, the uptrend remains strong. "The market remains in a strong technical position, with little evidence on the price charts that a trend change is near. The market is closing in on the historic all-time high at US$12.90 a bushel, hit in 1973. That will likely act as a magnet," said an analyst who follows technical charts.

One analyst said Wednesday's rally was significant. "Nearby soybeans have traded above (Wednesday) high on just one day in history," when the July soybean contract hit US$12.90 on June 5, 1973, and never closed as high as Wednesday's settlement prices of US$12.20 3/4 for the January contract and US$12.39 1/2 for the March. The previous nearby daily high close was set on June 4, 1973 at US$12.10, he said.

Overseas markets were firmer, following gains in CBOT soybeans. The benchmark March contract on Bursa Malaysia Derivatives ended MYR17 higher at MYR3,097 a metric tonne after reaching an all-time intraday high of MYR3,150/tonne. Dalian Commodity Exchange soybean futures rose to a record RMB4,694 a metric tonne, up RMB70. Rotterdam soybean and soymeal prices at midday were firmer, as were European vegoils.

Oilseed analysts said there is little fresh news to guide soybeans, aside from technical chart points and the rash of investment money that has poured into the market recently. The rally in soybeans reminds one veteran analyst when in the 1970s soybeans were called "protein gold."

One event the markets are watching is the weather in South America, particularly in Argentina. The near-term forecast is for mostly dry conditions, with some thundershowers possible in northern Sante Fe and in Entre Rios. Temperatures average near to above normal today and Friday, above normal Saturday, said DTN Meteorlogix.

The weather firm "is watching the development of a ridge over northwest and central Argentina next week as it could mean hotter and drier conditions for the central agri belt. However, this is a long range outlook and subject to day to day changes," it said.

Argentina has been dry lately, during the developmental stage of corn and soybean crops. The country is a sizable producer of grain and oilseeds and given the snugness of global supplies, end-users are counting on its production.