July 7, 2008


CBOT Soy Outlook on Monday: Down 35-40 cents; improved weather, outside markets



Soybean futures on the Chicago Board of Trade are seen starting Monday's day session sharply lower, pressured by a lack threatening Midwest weather and bearish outside market influences.


CBOT soybean futures are called 35 to 40 cents lower.


In overnight electronic trading, July soybeans were 38 1/2 cents lower at US$16.19 1/2 and November soybeans were 39 1/2 cents lower at US$15.91 1/2. December soyoil was 133 points lower at 67.65 cents per pound and December soymeal was US$13.50 lower at US$415.50 per short tonne.


Weather is the key influence on early price direction, with the absence of extreme heat and showers moving through the Midwest enticing traders to reduce weather premium placed in the market last week, said Jason Roose, analyst with U.S. Commodities in West Des Moines, Iowa.


The market was worried last week about a heat ridge forming in the central U.S., but the threat has diminished and risk premium is being pulled out, he added.


Outside markets are expected to lend pressure to prices as well, with a stronger U.S. dollar, and declines across crude oil, silver and gold futures providing outside weakness, traders said. Asian markets retreated in overnight action as well.


A market technician said all technical trends remain solidly bullish, though seasoned grains traders are well aware that the post-Fourth of July period can usher in extreme volatility, from a historical and seasonal perspective.


On the upside, the next key target for November soybeans is to push and close prices above solid technical resistance at US$16.50 a bushel. The next downside price objective is pushing and closing prices below psychological support at US$16.00, he said.


First resistance for November soybeans is seen at Thursday's contract high of US$16.36 3/4 and then at US$16.50. First support is seen at US$16.10 and then at US$15.95 1/2.


Scattered thundershowers moved through the eastern Midwest during the weekend, a few showers produced between 0.3 to 1 inch rains across central and east-central Illinois overnight, said Joel Burgio, meteorologist with DTN Meteorlogix. The western Midwest was dry during the weekend, but thunderstorms are moving through northern Nebraska, northern and southeastern Iowa, he added.


Showers and thunderstorms are on tap for the western Midwest through Monday night, moving into the eastern Midwest Tuesday, Burgio said. Most of the Midwest will receive from 0.3 to 1.5 inches of rain, with temperatures cooler early in the week and turning warmer late week, Burgio added. Meanwhile, some ridging is expected in the lower Mississippi Valley, but the heart of Midwest doesn't seem at risk, he added.


In other news, Argentina's House narrowly approved the president's sliding-scale grain and soybean export tax plan Saturday, sending the bill to the Senate for a vote. However, farm groups have warned that a Congressional endorsement of the tax may lead them to go back on strike.


In deliveries, July soybean deliveries totaled 19 lots. The house account at ADM Investor Services issued all 19 lots, with a customer account at Fortis Clearing stopped all the lots. The last trade date assigned was June 17.


On tap for Monday, U.S. Department of Agriculture is scheduled to release its weekly export inspections report at 11 a.m. EDT and its weekly crop progress report at 4 p.m. EDT. The Commodity Futures Trading Commission will release its weekly commitment of traders report at 3:30 p.m. EDT. The report normally released on Friday was delayed due to the 4th of July holiday.


In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Monday on a good U.S. weather forecast. The benchmark January 2009 soybean contract settled RMB52 lower at RMB5,082/tonne.


Crude palm oil futures on Malaysia's derivatives exchange fell 3.3% Monday as investors sold, taking leads from a weak demand in the cash market and a slump in soyoil prices. The benchmark August contract on Bursa Malaysia Derivatives ended MYR118 down at MYR3,512 a metric tonne.

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