May 26, 2010
Corn and soy futures pressured by dollar, optimal US weather
US grain and soy futures fell on Tuesday (May 25) as a firmer dollar and a retreat in global stock markets led investors to abandon riskier assets such as commodities.
The dollar rose to a near four-year peak against the euro on worries about the euro zone's fragile banking system and debt situation, making dollar-denominated commodities less attractive on global markets.
The Reuters-Jefferies CRB index, representing a market basket of 19 commodities, was down 1.1% after falling to its lowest level since early September 2009.
Optimal weather in the US Midwest and a strong start to the growing season for corn and soy added to the bearish tonne in grains.
At the Chicago Board of Trade, corn posted the biggest percentage drop, down nearly 1% at midday, while soy hit a two-month low and wheat set life-of-contract lows.
"There is a lot of pressure from the outsides, but we would have been lower anyway because the weather is great and crop conditions are good," said Paul Haugens, vice president for Newedge USA.
Weekly crop ratings from the US Department of Agriculture (USDA) emphasised the point. USDA said on Monday (May24) that 71% of the US corn crop was rated good to excellent, a jump from 67% a week earlier. Analysts had expected only a one-point increase.
Forecasts for the US Corn Belt called for a few showers in western areas through Wednesday (May 26), but otherwise, warm and mostly dry weather this week should help farmers wrap up seeding and give emerging crops a boost.
"Compared to the last couple of years, this is a very good start," said Mike Palmerino, a meteorologist with Telvent DTN.
USDA has projected that US farmers will grow a record-large corn crop this year at 13.4 billion bushels, and the second-largest soy crop at 3.3 billion bushels.
July soy was down 6 cents at US$9.34-1/2 per bushel after falling to US$9.27-1/2, the lowest spot price on a continuous chart since March 15 2010.
July wheat was down 4 cents at US$4.63-1/2, trimming losses after dipping to a contract low of US$4.56-1/4. Wheat futures remain weighed down by burdensome global stocks and uncertainty in other markets due to Europe's woes.
In Europe, prices also retreated, with the benchmark Paris November milling wheat contract down by 1.5% or EUR2.25 (US$2.77) to EUR144.50 /tonne (US$177.6). Prices had rallied on Monday amid signs that hot and dry weather had started to pose a threat to yields, particularly in top producer France.
