November 5, 2008
CBOT Soy Outlook on Wednesday: Expected to slip on profit-taking
Soybean futures on the Chicago Board of Trade are expected to slip during Wednesday's opening trades, in line with overnight losses and pressure from profit-taking in equities and commodities.
CBOT soybean futures are called 2-4 cents lower.
In overnight electronic trading, November soybeans shed 2 1/4 cents to US$9.47 1/4 cents per bushel. January beans dropped 2 1/2 cents to US$9.56 1/2. December soymeal dropped 1 cents to US$276.80 per short tonne, while December soyoil added 3 points at 36 cents per pound.
A total of 32 contracts were delivered against the CBOT November soybean futures contract. A customer account at Citigroup issued 30 lots, with a customer account at Tenco the sole stopper with 32 lots. The last trade assigned was Oct. 23.
"We're consolidating while we wait for new information," the trader said. "We're seeing some profit-taking in the stock markets and the grains."
As traders wait for long-term decisions on economic policy and cabinet appointments from President-elect Barack Obama, "the next big thing is the [USDA] report on Monday."
The U.S. Department of Agriculture is scheduled to release updated estimates Nov. 10 at 8:30 a.m. EST.
"Soybean prices rallied up to the top of this fall's down-trending bear channel on the charts Tuesday, but failed to penetrate it," noted Arlan Suderman, Farm Futures market analyst in his daily commentary.
"Buying interest dried up at that point and prices drifted lower to settle near the bottom of the session's trading range," he said. "That leaves prices vulnerable to fresh weakness in the days ahead if the outside markets turn weaker once again.
"Breaking out of the bear channel would suggest a change in market direction and a likely harvest low behind us," he added. "A sustained move above US$9.70 on the long-term continuation charts would be required at this point to violate that resistance."
To move toward technical control of January soybean futures, bulls must close above major psychological resistance at US$10 a bushel, a market technician said, marking first resistance at Tuesday's high of US$9.81 3/4.
Short covering and bargain-hunting buying were featured in Tuesday's rally, supported by bullish outside markets, including sharp gains in crude oil and marked losses in the U.S. dollar, the technician said. But, he added, "bears remain in overall near-term technical command."
Soybean bears aim to close January soybeans below solid technical resistance at the week's low of US$9.19 1/4, he said, pointing to Tuesday's low of US$9.23 1/4 as support.
Rain and thundershowers in the west and central Midwest is expected through Thursday, possibly changing to snow in the northwest by Friday, according to DTN Meteorlogix.
Showers may also hit the eastern section of the region on Friday, with scattered showers or flurries expected in the Midwest over the weekend, the private forecasting firm said.
Temperatures through Thursday should range from 43-77 degrees Fahrenheit, but harvest weather will deteriorate during the next several during, DTN said.
In global trading news, soybean futures traded on the Dalian Commodity Exchange settled higher slightly Wednesday, tracking overnight gains in soybeans on the Chicago Board of Trade, and analysts foresee further upside on state plans to buy for reserves.
The benchmark January 2009 soybean contract settled RMB13 higher at RMB3,361 a metric tonne, after trading between RMB3,336/tonne and RMB3,399/tonne.
"Fundamentally speaking, the demand side isn't good, but futures were oversold in last month's slump, so such a rally can be expected," said Li Honglei, an analyst at Nanhua Futures.
The government's buying plan is also underpinning futures prices by supporting the cash market.
Mexico's 2008/09 marketing year soybean import estimate has been revised downward to 3.6 million metric tonnes, reflecting decreased demand from the feed industry, according to a U.S. Department of Agriculture attache report posted Tuesday on the Foreign Agricultural Services Web site.
Similarly, the total soybean consumption estimate for MY 2008/09 has been reduced to 3.685 MMT due to the anticipated poor macroeconomic performance in CY 2009 (See MX8065).
Indian exporters have contracted to export around 1.1 million metric tonnes of the new soybean meal crop so far for shipment in November-December, a senior industry official said Wednesday.
"The deals have been contracted at an average price of US$290-US$300/tonne, although some deals in the beginning of the new crop season were signed at around US$400/tonne," said Rajesh Agrawal, coordinator of the Soybean Processors Association of India.
He said although prices have fallen in the last few weeks, soy meal exports are likely to be robust this year at 5.5 million tonnes.
Crude palm oil futures on Malaysia's derivatives exchange rose as much as 9.2% Wednesday on strong buying amid spillover strength from crude oil but shed much of the gains on intraday long liquidation, said trade participants.
Traders said India is yet to announce any hike in the import duty on palm oils, in anticipation of which CPO futures fell 7.2% Tuesday.
The benchmark January contract on the Bursa Malaysia Derivatives rose above MYR1,700 a metric tonne for the first time in 15 days and has risen around 30% after hitting a 3-year low of MYR1,331/tonne early last week.
The January contract ended MYR62 higher at MYR1,640/tonne, off an intraday high of MYR1,723/tonne.
Crude oil, which dragged down CPO prices sharply last month, provided support for a rally.
In Brazil, more rain would aid the environment for planting and developing soybeans through northern Mato Grosso, while weather is "generally favorable" through Parana and "drier weather would benefit fieldwork in Rio Grande do Sul," DTN said.
Meanwhile, in Argentina, "beneficial rains" are "at times" improving soil moisture conditions for crop planting, the forecasters add.