December 30, 2008
CBOT Soy Outlook on Tuesday: Up 9-11 cents; south American weather, dollar
Soybean futures on the Chicago Board of Trade are poised for a higher start to Tuesday's day session, underpinned by South American weather concerns and weakness in the U.S. dollar.
CBOT soybean futures are called 9 cents to 11 cents higher.
In overnight electronic trading, March soybeans finished 9 1/2 cents higher at US$9.55. March soymeal was US$3.40 higher at US$294.90 per short tonne, while March soyoil ended 61 points higher at 33.14 cents per pound.
The market is expected to follow the overnight theme, with dryness issues in Argentina and southern Brazil providing fundamental support, analysts said. The moisture concerns in the southern hemisphere have raised concerns about 2009 global supplies, with traders adding some risk premium back in the market following Monday's technical correction, a CBOT floor analyst said.
Weakness in the U.S. dollar index is a supportive feature adding to the higher tone. A weaker U.S. dollar makes U.S. exports more attractive to world importers.
Strong export demand from China remains an underlying theme, but upside momentum is seen limited by cautious buying in thin holiday markets. Traders are quick to consolidate positions on signs of upside exhaustion following a 3-week rally, analysts added.
A technical analyst said stochastics and the relative strength index are overbought and are turning neutral, hinting that a short-term top might be in or is near. A closes below the 20-day moving average crossing at US$8.63 1/4 basis the March contract would temper the near-term friendly outlook, he said.
If March extends this month's rally, November's high crossing at US$9.89, then the 25% retracement level of the July-December decline crossing at US$9.97 3/4 are the next upside targets, the analyst added.
The DTN Meteorlogix weather forecast said Argentina soybeans will come under some stress due to less than ideal rainfall and higher than normal temperatures during the next 5-7 days. It still appears likely that hot weather will return by the end of this week and this hot weather may continue into early next week.
In Brazil, moderate to heavy rains are forecast for Parana, Mato Grosso do Sul and Mato Grosso by the end of this week or early in the weekend. This will provide adequate-to-surplus soil moisture for crops, but it could also cause local flooding. Rainfall potential for Rio Grande do Sul is less, but there should be enough to help improve conditions for crops in the area, Meteorlogix reports.
Commodity Futures Trading Commission in its supplemental commitments of traders report Monday reported index funds increased their net long positions in CBOT soybean futures and options combined, which now total 90,770 contracts, up from 89,731 the prior week. Traditional large speculative traders now hold 7,315 net long positions in CBOT soybean futures and options combined contracts as of Dec. 23, compared with net longs of 6,148 in the previous week, according to CFTC. Commercials held net short combined futures and options positions totaling 81,900 contracts, up from the previous week's 78,973 contracts, as reported in the CFTC supplemental report.
In overseas markets, soybean futures traded on the Dalian Commodity Exchange settled lower Tuesday, as the market lost upward momentum after a recent rise. The benchmark May 2009 soybean contract settled RMB29 lower at RMB3,374 a metric tonne.
Crude palm oil futures on Malaysia's derivatives exchange rose as much as 5.1% to a 29-day high Tuesday on speculative buying, short covering and support from outside markets such as crude oil and soybean oil, trade participants said. The benchmark March contract on Bursa Malaysia Derivatives ended MYR81 higher at MYR1,671 a metric tonne.