October 8, 2008

 

CBOT Soy Outlook on Wednesday: Mixed; outside markets eyed

 

 

Soybean futures on the Chicago Board of Trade are called mixed Wednesday, with oversold market conditions providing support while a lack of investor confidence is expected to attract speculative sales, analysts said.

 

In overnight electronic trading, November soybeans were 3 cents higher at US$9.29. December soyoil was 71 points lower at 39.11 cents per pound and December soymeal was US$0.30 higher at US$257.10 per short tonne.

 

Supportive underlying fundamentals coupled with oversold conditions should provide some strength to prices, but outside markets remain an "overriding influence" on prices, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

Coordinated global rate cuts earlier Wednesday by Central Banks are seen as a supportive feature if it provides some stability to the financial sector. World equity futures markets initially bounced on the news, but have retreated since, with crude oil futures down near US$2.00 a barrel as well.

 

The Federal Reserve, European Central Bank and other major central banks announced coordinated cuts in target interest rates, the latest dramatic action to help stem a growing global financial crisis. The Fed's open market committee voted unanimously to cut its target federal funds rate 50 basis points to 1.5%.

 

The reaction of the financial sector shows the market is going to have to heal itself, with outside influences not enough to regain investor confidence, Roose said.

 

On the fundamental side, outlooks for a downward revision in the government's soybean yield estimate, solid underlying demand and concerns about field losses if harvest delays linger on are seen as supportive if financial markets show some stability.

 

A market technician said futures are short-term oversold and due for more of an upside corrective bounce very soon. The next upside price objective for November soybean is to push and close prices above solid technical resistance at this week's high of US$9.83 a bushel. The next downside price objective is pushing and closing prices below major psychological support at US$9.00.

 

First resistance for November soybeans is seen at Tuesday's high of US$9.51 1/2 and then at US$9.83. First support is seen at Tuesday's low of US$9.16 3/4 and then at US$9.00.

 

The DTN Meteorlogix weather forecast said there is no significant cold weather threat for Midwest crops during the next 7 days. Drier weather through Saturday should help improve conditions for the harvest. Rain may return to the region during Sunday and Monday but this appears to be more for the west than the east, Meteorlogix said.

 

In other news, the Brazilian 2008-09 soybean crop harvest is forecasted between 60.1 million and 61.2 million metric tonnes, the National Commodities Supply Corp, or Conab, said Wednesday. Planted area is seen between 21.5 million hectares and 21.9 million hectares- up from 21.3 million hectares in the 2007-08 season, Conab added

 

Brazil harvested 60.02 million tonnes from the 2007-08 soy crop, Conab said in its first crop estimate for the season.

 

In deliveries Wednesday, Oct soymeal deliveries totaled 539 lots. Issuers and stoppers were scattered among various commission houses. The last trade date assigned was October 6.

 

Oct soyoil deliveries totaled 605 lots. Issuers were scattered among various commission houses, while the house account at ADM Investor Services was the primary stopper of 381 lots. The last trade date assigned was October 6.

 

In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled sharply lower Wednesday but off their lower limit as short sellers covered their positions to avoid mandatory liquidation. The benchmark January 2009 soybean contract settled RMB144 lower at RMB3,499/tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange erased all gains made in early trading and the previous day, falling as much as 5.1% Wednesday on spillover impact from weakening crude oil. The benchmark December contract on Bursa Malaysia Derivatives ended MYR75 lower at MYR1,775 a metric tonne.