CBOT SOY OUTLOOK: Seen Lower; Argentina Weather, Fund Positioning

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CHICAGO (Dow Jones)--U.S. soybean futures are expected to start Friday's day session lower, as traders reduce risk exposure on improved Argentina weather outlooks and the anticipation of speculative fund repositioning in the market.

Analysts project soybeans to open 8 cents to 10 cents lower on the Chicago Board of Trade. In overnight trading, the January future was down 9 cents at $13.60 1/2 a bushel, and March soybeans, the most active contract, were down 7 1/4 cents at $13.70 3/4 a bushel.

Longer-range weather forecasts pointing toward improved rain potential for dry areas of Argentina's soybean belt are enticing traders to trim risk premium from prices, said Jason Roose, an analyst with U.S. Commodities, a brokerage firm in West Des Moines, Iowa.

Argentina is the world's third leading producer of soybeans behind the U.S. and Brazil.

Rainfall this week helped to ease stress to reproductive crops in Argentina, especially over La Pampa and southern Buenos Aires, Telvent DTN said in a morning forecast.

The anticipation of beginning of the year fund rebalancing in the market, which is expected to produce selling in agriculture markets, is seen weighing on prices as well.

Large index funds that typically take on long positions in the market are looking to rebalance away from various commodity markets.

Many funds have been buying into the soybean market over the past year amid strong supply and demand fundamentals, shifting way from financial markets due to poor economic conditions, Roose said. The funds are seen shifting some interest back to financials on optimistic outlooks for the economy, particularly with grain and oilseed markets at historically high levels and tight supply forecasts already priced in the market, he added.

Traders are expected to continue to take profits on prior gains with traders also concerned about weakening export basis levels amid signs of slowing export demand reflected in Thursday's lagging export sales data.

However, news of fresh sales to China, the world's leading importer of soybeans and the driving force behind soybeans price strength of the past six months, should add support.

The U.S. Department of Agriculture announced Friday private exporters reported the sale of 180,000 metric tons of soybeans to China for delivery in the 2010-11 marketing year.

Otherwise, analyst say the declines are not expected to produce any significant losses, and may open the door for bullish reaction to next week's USDA crop reports.

The USDA will release its annual production, quarterly grain stocks and supply and demand reports Wednesday.

-By Andrew Johnson Jr., Dow Jones Newswires; 312-347-4604; andrew.johnsonjr@dowjones.com



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