August 8, 2008
CBOT Soy Outlook on Friday: Seen dropping on strong dollar, weather



Chicago Board of Trade soybeans are expected to open lower Friday on pressure from outside markets and favorable weather, as the market erases Thursday's gains, traders said.


CBOT Soybean futures are called 25 to 30 cents lower.


In overnight electronic trading, August soybeans were down 22 cents to US$12.21 per bushel and November soybeans were down 31 cents to US$12.08. December soymeal was down US$11.20 to US$321.50 per short tonne and December soyoil was down 80 points to 52.40 cents per pound.


The market "overreacted" in its rebound on Thursday, a trader said. He said outside markets are weaker, and soybeans will be pressured primarily by a stronger U.S. dollar.


"The worry is that the dollar starts popping, and that starts eroding U.S. exports, et cetera, et cetera," the trader said.


The DTN Meteorlogix forecast calls for moderate temperatures and mostly dry conditions through Sunday in the U.S. Midwest, with showers and thunderstorms in far western areas on Monday, continuing across the Midwest on Tuesday.


Traders are wary of the market following Wednesday's sharp losses. Rumors emerged that a large fund holding a significant long position was reclassified and forced to liquidate its holdings. Although the rumors have not been confirmed, traders say its clear that something happened to cause the steep drop.


"People are getting chopped up pretty bad," a trader said.


He added that there will be consolidation and profit-taking ahead of the weekend and the U.S. Department of Agriculture's crop production report, which will be released Tuesday.


Analysts are projecting that the USDA will maintain its same yield projection from July, 41.6 bushels per acre, and increase overall production slightly, from 3.000 billion bushels in July to an estimated 3.003 billion bushels Tuesday.


Technical odds are high that at least a near-term market top is in place, a technical analyst said. The next upside price objective is to push and close November prices above psychological resistance at US$13.00 a bushel. The next downside price objective for the bears is pushing and closing prices below solid technical support at this week's low of US$11.99.


First resistance for November soybeans is seen at Thursday's high of US$12.57 1/4 and then at US$12.75 1/2.


In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled mostly slightly higher Friday, but analysts said fundamentals remain bearish.

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