July 29, 2013

US soy sees biggest weekly drop in four years

US soy futures have declined 1.5% on July 19 and are bound for the biggest weekly drop in nearly four years, due to poor demand for earlier crop supplies and buyers' preference to wait on a bumper harvest.

December's fresh corn crops sees little change after four straight sessions of drops which were caused by favourable weather conditions.

End-users are beginning to turn away from purchasing costly soy crops of earlier dates, given the prospects for a record-sized crop and cheaper prices in the future. A rising number of farmers selling their remaining older supplies of soy has also plunged prices.

Spot basis bids for corn and soy plummeted across the US Midwest on July 25 in a wave of declines typically seen during the autumn harvest. The losses in soy futures, which fell to their lowest level in more than a year, have been triggered by a selloff in soymeal which fell by its daily trading limit for the second consecutive day on the same day.

Chicago Board of Trade August soy slid 1.5% to US$13.35-1/4 a bushel, the lowest since June 2012 while the front-month soymeal contract slid 4.5% to US$427.8/tonne.

For the week, soy has lost more than 10%, the biggest decline since September 2009, while soymeal is down 11%, the most in nearly four years. Soy prices have fallen nearly 16% over the past three weeks.

Futures prices for new corn supplies remained under pressure from forecasts of crop-friendly weather across the US grain belt. According to an agricultural meteorologist, below-average temperatures and occasional showers through the end of July will aid the pollinating US corn crop and boost growth of the soy crop.

New corn for December rose 0.1% to US$4.79-1/4 a bushel after falling for four consecutive sessions. Soy futures for November lost 0.6% to US$12.17/bushel. CBOT sources said that over the past three days, commodity funds sold an estimated 31,000 contracts, or 155 million bushels of soy valued at around US$2.356 billion based on July 22's closing price of US$15.20-1/4 for August.

Tight stocks of soy and soymeal, due to a drought last season, had led to huge purchases of each commodity. The developement has caused a huge build-up of long positions in futures market.