November 26, 2010

CBOT soy declines while corn and wheat advances
 
 

CBOT soy declined for the first time in four days as concerns that the Irish debt problem may spread to Spain and Portugal, while CBOT corn and wheat advanced.

January-delivery soy dropped as much as 0.8% to US$12.4475 a bushel on CBOT before trading at $12.50. The oilseed has gained 4% this week, the first weekly advance in three weeks.

"It is a risk-aversion trade as what is happening in Portugal now is likely to strengthen the dollar," said an analyst. "Any dip will be well supported in corn and soy because of weather concerns and China will probably get back to the market," he said.

The dollar rose to a two-month high against the euro this week as Europe's debt crisis boosted the appeal of the US currency as a safe investment. The dollar strengthened to US$1.3331 from US$1.336 on Thursday (Nov 25).

Corn for March delivery gained as much as 0.3% to US$5.555 a bushel before trading at US$5.5525. The contract has advanced 3.8% this week, heading for a first weekly gain in three. March-delivery wheat gained as much as 0.6% to US$6.895 a bushel on CBOT before trading at US$6.8875.

Concern over a shortage of good-quality grain across emerging economies is supporting gains in wheat, the analyst said. Dry weather in South America is likely to hurt production of corn and soy, he said.

Wet weather early in the year and a late frost in Canada, the world's second-biggest wheat exporter, are likely to damage crop quality.

Dry weather this week will produce a two-month rainfall deficit of 7 inches (18 centimetres) across South America, according to T-Storm Weather. A La Nina weather event has reduced moisture, the forecaster said. The US is the world's biggest exporter of corn and soy, followed by Brazil and Argentina.

Brazil soy and corn farmers may face a drought similar to the one that damaged 13% of its grain and oilseed crops five years ago, said another analyst.

The southern part of Brazil has received below-average rain since October because of a La Nina weather pattern, raising concern that crops being planted now will be damaged before next year's harvest, the second analyst said. Brazil is the world's second-largest soy shipper and third-largest corn exporter.