September 25, 2009

A weather market was traded in mid-September as buyers and sellers tried to determine the final size of the 2009 US soy crop.

 

The September 14 USDA crop production report did not include harvest reports, and the percent of soy dropping leaves stood at 17 percent against 36 percent for the five-year average.

 

When a weather model on September 15 predicted frost as early as September 21, the soy markets zoomed up.

 

Ray Grabanski, president of Progressive Ag in West Fargo, North Dakota, said the soy market broke US$2 and then rallied US$1 since June. Then the soy market broke US$2 and rallied US$1.50 back. And then between September 13 and September 15, the market rallied 75 cents.

 

On the CME Group exchange for September 18, soy closed with November at US$9.38 per bushel, January at US$9.42 1/2, March at US$9.44, May at US$9.42, and July at US$9.41 1/2 per bushel.

 

Compared with futures contracts on September 4, November was 16-cents higher, January was 15.4-cents higher, March was 18-cents higher, May was 15-cents higher, and July 2010 was 12-cents higher.

 

According to the CME Group market commentary for September 18, traders remained fearful that frost could affect the size of the US soy crop. Frost was forecast for parts of Canada and threatened to reduce the size of the canola crop.

 

In addition, reports from China suggested growers had a 3-million tonne reduction in soy yields due to drought this summer and frost in recent days.

 

The USDA announced sales of 121,000 tonnes of soy from the US to China on September 17. Another sale of 182,000 tonnes of US soy to China was announced on September 18.

 

Analysts at CME Group suggested that sales of soy to China would help alleviate fears that a US and Chinese dispute over car tires would affect purchases of US soy.

 

The weekly export sales report announced on September 17, indicated sales of 704,400 tonnes. As of September 10, cumulative soy export sales were almost 51 percent of the USDA forecast for 2009-10, compared with 25.4 percent for the five-year average for this point in the marketing year.

 

Sales need to average 12.4 million bushels per week to meet the USDA soy export forecast.

 

Grabanski suggested that a continuing weak dollar plus rising stock numbers could help crop prices post-harvest - once the commodity markets can quantify the size of the 2009 crop.

 

He noted that USDA's September reports showed increases in soy production in Brazil and Argentina for the coming season.