July 10, 2012

Heat wave boosts soy prices at an all-time high

As a result of the intense heat wave in the US farming belt, the price of soy meal hit an all-time high which made the pig and poultry producers fear for their margins.

Soy meal on Thursday (July 5) exceeded the record set during the 2007-08 food crisis. Benchmark CBOT July soymeal futures rose to a record US$475 per short tonne, up 4.6%.

Other futures markets also surged late in the session. Corn was at its highest in more than a year, with benchmark CBOT July corn reaching US$7.76 ¾ a bushel, up 8.1% on the day.

The December contract, against which much of the coming harvest will be priced, hit a peak of US$7.13 a bushel, up more than 37% over the last three weeks.

The jump in prices will specifically hurt chicken processors since poultry eat more than 40% of the meal crushed from US soy.

Meal prices soared along with broader grain markets as drought and temperatures of more than 100°F (38°C) were forecast to continue in US Corn Belt states such as Illinois, Indiana and Iowa, threatening crop yields.

The rally in corn and soy prices also dragged wheat prices higher. CBOT July wheat rose 5.2% to US$8.22½ a bushel, the highest since May 2011, when the market was still wrestling with the impact of an export ban in Russia.