January 30, 2006

 

CBOT Soy Outlook on Monday: Up 12-15 cents, argentine weather, technicals

 

 

Chicago Board of Trade soybean futures are expected to begin the trading week to the upside, extending Friday's price strength on weather concerns for Argentine crops and technically inspired speculative buying.

 

Analysts expect soybeans to open 12-15 cents per bushel higher.

 

Hot and dry weather in Argentine growing areas is serving as the catalyst for traders to put risk premium in the market, with commodity fund shorts expected to cover positions, said Don Roose, president US Commodities in West Des Moines, Iowa.

 

Technically inspired buying is seen aiding the firm tone, with friendly chart patterns following Friday's gap higher breakout price action expected to generate follow through buying interest.

 

Technical analysts said market bulls do have some fresh near-term technical momentum on their side. It will take a close back above psychological resistance at $6.00 to provide the bulls with better upside technical momentum.

 

First resistance for March soybeans is seen at $5.90 1/2 - Friday's high - and then at $6.00. First support is seen at $5.85 and then at $5.80 - Friday's low.

 

In overnight electronic trade, March soybeans were 14 3/4 cents higher at $6.04, March soymeal was $3.60 higher at $190.00 and March soyoil was 35 points higher at 22.40 cents per pound.

 

The combination of technical momentum and the drying trend in Argentina are supportive factors, but traders remain leery of aggressively pushing prices in the face of bearish underlying fundamentals, analysts said.

 

The market has corrected from oversold conditions and with rallies at this time of year only "as good as the next weather forecast", market fundamentals could provide a dose of reality on any sign of buying exhaustion, Roose adds.

 

DTN Meteorlogix Weather Service said hot, dry weather during the weekend is to depleting available soil moisture in Argentina. Coverage of any thundershower activity during the next five days is somewhat uncertain but looks to be low.

 

In Brazil, scattered rains are forecast for northern provinces during this week. Overall crop conditions have improved recently due to showers last week and this past weekend, Meteorlogix added.

 

The Commodity Futures Trading Commission said Friday in its commitments of traders report that large speculative traders held net short futures and options positions totaling 18,076 lots in soybeans, 20,013 contracts in soyoil while holding a net long position of 4,431 lots in soymeal as of Jan. 24.

 

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).

 

Rotterdam soybeans and soymeal prices were higher, and European vegoils were higher.

 

In overseas markets, Chinese soybean futures and Malaysian palm oil futures were closed due to the Lunar New Year Holiday.