U.S. soybean futures are expected to bounce Wednesday, staging a recovery from Tuesday's declines amid supportive supply outlooks and the absence of outside market pressure.
Analysts project soybeans to open 6 cents to 8 cents higher on the Chicago Board of Trade. In overnight trading, March soybeans, the most active contract, was up 7 cents at $13.81 1/2 a bushel.
The market is expected to return its focus to tight projected end of year inventories, with the need to ration usage and entice farmers to increase 2011 acreage supporting prices, analysts said.
A weaker U.S. dollar coupled with higher crude oil and metal futures are seen lending broader based support to prices. Futures stumbled Tuesday, facing pressure from a firmer U.S. dollar and broad based selling across a host of commodity markets.
However, improved crop conditions in Argentina is expected to limit advances, as rains moving through the region provide needed moisture for crops suffering from hot, dry conditions in prior weeks.
Argentina is the world's third-largest producer of soybeans behind the U.S. and Brazil, and is counted on to relieve the strain on U.S. supplies amid strong global demand. U.S. end of marketing year supplies are projected to dwindle down to precariously low levels, making strong production in Latin America essential to alleviate the pull on U.S. inventories.
The Telvent DTN weather forecast said "it appears likely that the major corn and soybean areas will see episodes of scattered thunderstorm activity for at least the next 6 days." "This will help ease stress to crops and may improve prospects for soybeans, especially second crop soybeans," Telvent added in the forecast.
Meanwhile, U.S. Department of Agriculture announced Wednesday, private exporters reported the sale of 227,000 metric tons of soybeans for delivery to China. Of the total, 60,000 metric tons are for delivery during the 2010/2011 marketing year, and 167,000 metric tons are for delivery during the 2011/2012 marketing year.
"At least 4 cargoes of soybeans were sold to China on Tuesday's price break for Oct-Nov shipment on top of the supply agreement sales that were announced Friday," according to an AgResource Company market note.
The break in CBOT prices produced positive margins for Chinese importers and crushers, and the U.S. can't afford to decline much farther to ignite new old crop Chinese demand in the face of tight projected U.S. stocks, AgResource added in the note.