July 23, 2008


CBOT Soy Outlook on Wednesday: 30-35 cents down on overnight, crude, weather



Chicago Board of Trade soybean futures are expected to start Wednesday's day session sharply lower on follow-through liquidation from overnight trading, as the market keeps an eye on weakness in crude oil and mostly favorable weather forecasts.


Soybeans are called to open 30 to 35 cents per bushel lower. In overnight electronic trading, nearby August soybeans fell 34 1/4 cents to US$13.82 1/2, and November soybeans shed 36 1/2 cents to US$13.72 1/2.


Losses in crude oil futures are a bearish influence on soybeans, along with continuing liquidation in CBOT corn, traders said. The other markets' weakness is preventing soybeans from setting a bottom, said Mike Zuzolo, analyst for Risk Management Commodities.


"The technicians and the short-terms traders are trying to buy on oversold conditions, but they're very quick to get out" if the other markets don't show strength, Zuzolo said.


There may not be any "substantial buying" in August soybeans until the contract moves above its previous day's high, Zuzolo said. The contract's high Tuesday was US$14.30 3/4 in electronic trading.


"They're not strong holders," he said about the short-term traders and technicians. "They're quick to turn around if they don't see the whole complex turn around."


On the daily bar chart, November soybeans are in a three-week-old downtrend, a technical analyst said. Heavy recent losses inflicted near-term chart damage, he said.


The next upside price objective for bulls is to push and close November soybeans above solid technical resistance at US$14.81, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at Tuesday's low of US$13.82 1/4, he said.


First resistance for November soybeans is seen at Tuesday's high of US$14.24 1/2 and then at this week's high of US$14.46 1/2. First support is seen at US$14.00 and then at US$13.82 1/4.


"Benign growing weather in the corn belt is bearish for beans," the technical analyst said.


Weather in the U.S. Midwest will continue to be "generally favorable" for developing soybeans, with "no signs of any significant hot, dry weather or persistent heavy rains," DTN Meteorlogix said in a forecast. Episodes of hot temperatures and below normal rainfall will continue to stress soybeans in the Delta, the private weather firm said.


In demand news, private exporters reported to the U.S. Department of Agriculture export sales of 120,000 metric tons of soybeans for delivery to unknown destinations during the 2008-2009 marketing year. The 2008-2009 marketing year for soybeans begins Sept. 1.


In Asian markets, China's soybean futures traded on the Dalian Commodity Exchange settled sharply lower Wednesday. The benchmark January 2009 soybean contract settled down RMB94, or 2.0%, at RMB4,558 a metric tonne, after trading in a broad range between RMB4,478 and RMB4,668/tonne.


Crude palm oil futures on Malaysia's derivatives exchange ended lower for the sixth successive trading day Wednesday and at their lowest level of the year. Investors liquidated longs and established short positions, taking leads from weak soyoil and crude oil prices.

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