November 9, 2010

 

US soy sets new high before dollar rebound halts advance

 

 

US soy climbed to the highest levels in more than two years on Friday (Nov 5) before a rebound in the dollar halted the advance and helped drive corn and wheat prices lower.

 

The dollar rose against a currency basket on Friday (Nov 5), bouncing from an 11-month low touched on Thursday (Nov 4) when investors dumped the greenback following the Federal Reserve's decision to pump more money into the US economy.

 

Most active January soy on CBOT rose as high as US$12.90 a bushel, a level not seen since September 2008 before the dollar's rebound pared gains. The contract stood US$0.04 one-quarter cents higher at US$12.79.

 

Funds have flowed into commodities after the US Federal Reserve's new stimulus plan, unveiled on Wednesday (Nov 3), had boosted appetite for riskier assets.

 

Grains and soy have been among the markets to benefit.

 

Analysts said strong export demand for soy could lead to a downward revision to US inventories in the USDA's monthly crop report next week.

 

"Since the beginning of September, US soy exports have been at 13.6 million tonnes which equals an increase of 46% compared to the previous year," analysts said.

 

CBOT December wheat fell 0.5% to US$7.10 per bushel while December corn slipped 0.7% to US$5.85 three-quarters.

 

Corn rose to the highest level in more than two years on Thursday as the dollar tumbled with December peaking at US$5.95 three-quarters.

 

European wheat futures also ended lower with a fall in the euro against the dollar not enough to support prices.

 

"We are rather expensive on the market to start with, notably compared to South American origins, as we saw in the Algerian tender yesterday," the trader said.

 

Algeria bought 200,000 tonnes of optional-origin milling wheat at US$326-US$327 a tonne, cost and freight included, for shipment in January.

 

Prices paid suggested the wheat could come from South America rather than France, its main supplier.

 

Benchmark January on Euronext milling wheat futures was EUR1.25 (US$1.75) lower at EUR218.25 (US$304.72) a tonne.

 

Rising food prices had spurred concerns of a repeat of the 2008 food crisis which led to riots across the world as nations scrambled for supplies, although analysts said that the US dollar's weakness may help avoid that.