September 23, 2008

 

CBOT Soy Outlook on Tuesday: Down 15-20 cents; outside markets remain focus

 

 

Soybean futures on the Chicago Board of Trade are expected to start Tuesday's day session on the defensive, influenced by outside markets once again.

 

CBOT soybean futures are called 15 to 20 cents lower.

 

In overnight electronic trading, November soybeans were 19 1/2 cents lower at US$11.85 1/2. December soyoil was 123 points lower at 48.80 cents per pound, and December soymeal was US$4.20 lower at US$323.80 per short tonne.

 

In the absence of fresh fundamental news, traders are keeping their focus on outside markets, with lower crude oil futures and a firmer U.S. dollar index expected to apply pressure to prices, analysts said.

 

There is a little less inflationary worries in the market in early action, a trader said.

 

Monday's sharp gains are seen overdone in the absence of outside support. Market participants continue to take a cautious approach amid economic uncertainties that can quickly produce volatile price swings, analysts added.

 

Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson were due to testify before the U.S. Senate Banking Committee, starting at 9:30 a.m. EDT on turmoil in the U.S. credit markets and the recent actions involving government-sponsored entities, investment banks and other financial institutions.

 

Weekly crop ratings and progress failed to provide any new factors for the trade, but near term weather conditions remain bearish amid a lack of a frost threat through the end of the month.

 

A technical analyst said prices are in a nine-week-old downtrend on the daily bar chart. The next upside price objective for November soybeans is to push and close prices above solid technical resistance at the last reaction high of US$12.22 1/2 a bushel. The next downside price objective is pushing and closing prices below solid technical support at the August low of US$11.68.

 

First resistance for November soybeans is seen at Monday's high of US$12.12 and then at US$12.22 1/2. First support is seen at US$12.00 and then at US$11.75.

 

U.S. Department of Agriculture on Monday reported 44% of the soybean crop was dropping leaves, below 70% in 2007 and the average of 64%. In Iowa, 43% of the crop was dropping leaves, down from 75% last year and the average of 73%. In Illinois, 24% of the crop was dropping leaves, down from 79% in 2007 and the average of 64%, according to the USDA.

 

"With the absence of any threat of frost freeze this week and warming temperatures, it's building a little bit of a comfort zone, so to speak, so that we're at least missing that threat," said Joe Victor, an analyst with Allendale Inc.

 

The good-to-excellent rating for soybeans remained unchanged from last week at 57%, the USDA said. Analysts had expected the rating to remain steady.

 

The DTN Meteorlogix weather forecast said warm temperatures and only light showers favor maturing soybeans through next Sunday. Cooler temperatures and somewhat wetter conditions early next week would be unfavorable but it does not look to last too long.

In the U.S. Delta, drier, warmer weather during the next 7 days will favor soybean harvests, Meteorlogix said in the forecast.

 

In overseas markets, China's soybean futures traded on the Dalian Commodity Exchange settled higher Tuesday, supported by high overnight gains on CBOT. The benchmark January 2009 soybean contract settled RMB80 higher at RMB4,049 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended 1.7% lower Tuesday, snapping a three-day rising streak and easing from a 10-day high on long liquidation, said trade participants. The benchmark December contract on the Bursa Malaysia Derivatives ended MYR39 lower at MYR2,305 a metric tonne.