July 22, 2008

 

CBOT Soy Outlook on Tuesday: Up 10-12 cents; corrective bounce, oversold

 

 

Soybean futures on the Chicago Board of Trade are expected to begin Tuesday's day session higher, attempting to stabilize after a week of losses on oversold conditions and lagging crop development.

 

CBOT soybean futures are called 10 to 12 cents higher.

 

In overnight electronic trading, August soybeans were 16 1/4 cents higher at US$14.25 3/4 and November soybeans were 15 1/2 cents higher at US$14.18 1/2. December soyoil was 69 points higher at 61.94 cents per pound and December soymeal was US$3.40 higher at US$368.70 per short tonne.

 

The market is overdue for a technical bounce, finding support after the most active November future dropped US$1.93 in just over a week, said a CBOT floor analyst.

 

"It's turnaround Tuesday, and without any fresh news coupled with a crop that still lags in development, futures are poised to edge higher," he added.

 

Nevertheless, weather remains favorable for Midwest crops and that should keep a lid on upside potential, analysts said. However, there remains a lot of uncertainty in regards to yields and that will continue to support prices, particularly after the market trimmed a good piece of risk premium from prices in last week or so, analysts added.

 

The DTN Meteorlogix weather forecast said generally favorable weather will continue for developing corn and soybeans with no signs of any significant hot, dry weather or persistent heavy rains.

 

Outside market influences are neutral, but traders will continue to watch crude oil and metals as speculative traders have shown a willingness to liquidate length in commodities recently, a floor broker said.

 

A technical analyst said serious near-term chart damage has been inflicted recently. The next upside price objective for November soybeans is to push and close prices above solid technical resistance at US$15.00 a bushel. The next downside price objective is pushing and closing prices below solid psychological support at US$14.00.

 

First resistance for November soybeans is seen at US$14.30 and then at Monday's high of US$14.46 1/2. First support is seen at US$14.00 and then at US$13.75.

 

The U.S. Department of Agriculture said 45% of the U.S. soybean crop has bloomed, up from 26% the prior week but below the five-year average of 65%. In top soy producer Iowa, blooming of the soybean crop stood at 53%, up from 35% the preceding week but below the average of 75%. In Illinois, 39% of soybeans were blooming, up from 24% the previous week but below the average of 73%.

 

The pace of development isn't slow enough to rule out good yields, "it just kind of keeps us hanging in the balance," said Arlan Suderman, an analyst with Farm Futures.

 

The USDA said the good-to-excellent condition rating for the U.S. soybean crop was 61%, up from 59% the previous week. Traders had expected a one- to two-percentage point rise in the good-to-excellent condition rating.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled lower Tuesday on expectations of an increase in supplies, but the declines were capped on bargain hunting purchases. The benchmark January 2009 soybean contract settled RMB35 lower at RMB4,652 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended lower Tuesday for the fifth successive trading day on continued selling pressure amid choppy trade. Indonesia's plan to cut export taxes for various grades of palm oil and the prices at which they are calculated for August also weighed on prices. The benchmark October contract on Bursa Malaysia Derivatives ended MYR8 lower at MRY3,252/tonne.