U.S. soybean futures are poised for a higher start Wednesday, buoyed by speculation of renewed Chinese demand and supportive outside market influences.
In overnight trading, Chicago Board of Trade March soybean futures were 14 1/4 cents higher at $13.81 3/4 a bushel; May soybeans, the most active contract, was up 14 1/2 cents at $13.89 3/4. New crop November futures were up 14 cents at $13.42 1/4. Analysts expect soybeans to open 13 cents to 15 cents higher.
Talk circulating in the market that China is showing renewed interest in U.S. or Brazilian soybeans for April/May delivery is seen supporting prices, according to a market note from AgResource Co.
AgResource Co said they could only confirm the new interest, not any new sales.
Analysts said any time China is in the market for soybeans, prices will be sensitive to this renewed demand. Futures had previously rallied to 2 1/2 year highs on strong China buying amid the threat of smaller Argentina crops due to drought threats.
Meanwhile, precariously tight projected end of year supplies, and the uncertainty of 2011 acreage and weather amid the uphill battle soybeans face to attract spring acres, provides fundamental strength to underpin prices.
Insufficient increases in acreage will require higher-than normal crop yields come summer, if another year of tight supply is to be avoided.
Outside financial markets are expected to aide the market's higher theme, with a weaker U.S. dollar and higher crude oil futures attracting speculative buyers.
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. Crude oil influences grain and oilseeds due to their use in making renewable fuels.
After speculative buyers liquidated large positions in futures in recent weeks, the market is seemingly poised to find value. Commercial buying on price breaks and the market's need to ration demand in the face of precariously low end-of-year supply forecasts are seen underpinning prices.
However, the market remains cautious of the volatility that emerged from geopolitical issues in the Middle East and North Africa, and with crop forecasts for Brazil and Argentina exceeding prior expectations, advances are seen limited.
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.