U.S. soybean futures are poised for a lower start to Monday's day session as traders book profits amid slowing export demand and improved South American crop prospects.
In overnight trading, Chicago Board of Trade March soybean futures were 9 cents lower at $13.56 1/2 a bushel. May soybeans, the most active contract, was down 9 1/2 cents at $13.65 1/2. New crop November futures were down 6 1/2 cents at $13.23. Analysts expect soybeans to open 7-10 cents lower.
Global economic uncertainty in the face of political unrest overseas coupled with improved crop prospects for South American crops have traders poised to book profits on Friday's gains, said Dax Wedemeyer, analyst with West Des Moines, Iowa based brokerage U.S. Commodities.
The market is cautious of the volatility that emerged from geopolitical issues in the Middle East and North Africa, and with crop forecast for Brazil and Argentina exceeding prior expectations, traders are looking to limit risk exposure, he added.
Brazil and Argentina are the world's second- and third-largest producers of soybeans, respectively, behind the U.S. and are counted on to relieve the strain on U.S. supplies in the spring of 2011.
The sharp gains in soy futures Friday on bargain buying may have been a case of prices spiking "too much and too fast", with end of the month position evening taking some edge off prices as export demand shifts to South American origins, according to a AgResource Co. market note.
However, tight projected 2010-11 end of year supplies and the uncertainty of 2011 acreage and weather, leave little margin for error in new crop production. This will continue to support futures, particularly with the uphill battle soybeans face to attract spring acres.
Insufficient increases in acreage will require higher-than normal crop yields come summer, if another year of tight supply is to be avoided.
Weakness in the U.S. dollar is seen limiting losses as well. A lower U.S. dollar is supportive for commodities as most raw materials are dollar-denominated, making it less expensive for foreign buyers to import.
Meanwhile, commercial buying has picked on price breaks and analysts expect the trend will continue ahead of the upcoming growing season as ending stocks remain tight and uncertainty ahead of the growing season will mandate end users have adequate coverage.
On tap for Monday, USDA is scheduled to release its weekly export inspections report at 11 a.m. EST.