August 18, 2009

 

CBOT Soy Review on Monday: Wet midwest outlook sends prices to 3-week lows

 

 

Soy futures on the Chicago Board of Trade tumbled to the lowest levels in almost three weeks as a wet forecast for the Midwest this week fueled expectations for a record crop.

 

November soy futures fell 27 cents to US$9.54 1/2 a bushel, the lowest closing price since US$9.16 on July 29. September soys fell 36 1/2 cents to US$9.88.

 

Substantial rains soaked Iowa, Illinois, and other areas of the corn belt over the past 24 hours. Over the next five days, as much as 85% of the corn and soy belt will receive 1/2 inch to 2 inches of rain, Newedge USA, LLC, analyst Dan Cekander said, citing a Commodity Weather Group forecast.

 

"It's mainly the weather" pressuring soy futures, Cekander said. About 30% of the Midwest was dry the last few weeks, including areas of Ohio and other eastern regions. But "it looks like they're going to fill in a lot of those areas" with rain this week, he said.

 

Eroding demand from U.S. livestock feeders and a surge in the U.S. dollar also contributed to selling pressure in soys, Cekander said. A stronger dollar makes U.S. exports more expensive.

 

November soys have dropped over 10% from a two-month intraday high of US$10.66 Aug. 13. Bearish sentiment gained momentum as Midwest weather turned favorable, suggesting that U.S. farmers will meet or exceed the government's initial estimate for this year's soy crop, analysts said.

 

In a report released Aug. 12, the U.S. Department of Agriculture estimated this year's soy harvest at a record 3.199 billion bushels.

 

"This is expected to be a wet week across most of the Corn Belt, and in traders' eyes, crops are developing nicely," John Roach, of Roach Ag Marketing Ltd., said in a report Monday.

 

"At this time of year, user buying turns sluggish when crops are improving," Roach said. "Until something stimulates speculative buyers to put more money on the long side of the market, prices are likely to grind lower."

 

Early results from the first day of the annual Pro Farmer Midwest Crop Tour showed solid crops with good yield potential in Ohio, though some dryness was noted. Crops were deemed in good shape in South Dakota, but plant maturity remains an issue.

 

December soy meal futures fell US$7.10 to US$281.90 per tonne, the lowest closing price since US$276.20 July 27. Dec. soy oil futures fell 1.27 cents to 36.52 cents per pound, the lowest since 35.80 cents on July 31.

 

Commodity funds sold an estimated 5,000 soy contracts, 1,000 soymeal contracts and 2,000 soyoil contracts, CBOT floor sources reported.