February 4, 2008

US soy shows signs of vulnerability as futures tumble

From January 11 - 15, US soy futures market dip by over 50 cents on the nearby months, showing its first signs of vulnerability since October rallies, following sharp drops in the stock market.

Al Kluis of Kluis Commodities, Minneapolis said that the stock market became a significant factor in the soy market. Trends indicate that soy could back off from record highs when stock market falls.

On January 23, there were some panicky reactions when soy prices went down sharply. Some elevators bought more corn and soy on the sharply lower markets, Kluis pointed.

The soy market on January 25 closed at US$12.43/bushel; May at US$12.61; July at US$12.75; August at US$12.67; September at US$12.47, and November at US$12.32/bushel.

According to Chicago Board of Trade, soy rallied on January 25 due to strong outside markets as well as higher palm oil markets in Malaysia.

The weak US dollar has reaped significant and ongoing soy exports this year. An aggressive buying has been apparent, and analysts said it would be interesting to see if other countries continue to buy US soy when South American exports are available.

Brazil's soy is about 5 percent harvested with yields reported between 42-50 bushels/acre. Brazil's 2008 crop is projected to be very similar to its 2007 crop, with some problems with northern areas being too wet and southern areas being too dry.

Argentina has also struggled on problems with frost earlier, and now the weather is also getting too dry. Analysts are also watching on the developments on Argentina as it can also dictate how US soy would turn out in the global trade.

Kluis expressed that soy could be better by spring. Right now, the futures keep working higher, and people continue to sell into it. There's not likely to be any basis improvement for, at least, the next 30-60 days, he said.