December 7, 2007

 

Soy, corn futures fall as lower oil costs reduce biofuel demand

 

 

After reaching new highs in the past week, soy futures declined for the first time in three days and corn extended losses on speculation that reduced crude oil costs will lower demand for biofuels made from the oilseed and the grain. Wheat in the Chicago Board of Trade also dropped.

 

Crude oil fell for a third day after an unexpected surge in US fuel stockpiles heightened concerns about slowing demand growth. New York oil futures gained 42 percent this year, while soy have risen 60 percent.

 

Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said falling crude oil prices are putting pressure on soy and corn. The dollar's recent strength may also discourage buying interest in US commodities, he said. 

 

Soy for January delivery fell as much as 10.75 cents, or 1 percent, to US$10.8875 a bushel in electronic after-hours trading on the CBOT. The contract was at US$10.9025 at 4:17 p.m. Singapore time.

 

The contract gained 0.7 percent yesterday as hot, dry weather threatens young plants in Argentina, the third-largest soy producer. Futures reached a 34-year high of $11.14 on Nov. 26, after US farmers planted the smallest acreage in 12 years.

 

Soy prices are also being pressured by a lack of buying from China, the top importer of the oilseed, Shigemoto said.

 

China definitely needs to import more soy, but Shigemoto said it appears the country has bought enough soy for now.

 

In China, soy for September delivery, the most active contract on the Dalian Commodity Exchange, fell for the first time in four days, losing as much as 1.4 percent from the previous settlement to 4,261 yuan (US$575) a tonne. The contract settled at 4,289 yuan.

 

Corn for March delivery on the Chicago exchange was down 1.75 cents at US$4.095 a bushel at 4:17 p.m. in Singapore.

 

Crude oil for January delivery dropped as much as 1.1 percent to US$86.52 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The dollar Index extended gains against six major currencies, including the euro, making US commodities more expensive to importers with other currencies.

 

Wheat for March delivery fell as much as 10 cents, or 1.1 percent, to US$8.75 a bushel and traded at US$8.8125 at 4:22 p.m. Singapore time. The contract declined 1 percent yesterday after Egypt, the second-biggest importer of the grain, bought supplies from Russia instead of the US

 

Wheat prices, which reached a record US$9.6175 on Sept. 28, have gained 85 percent in the past year after adverse weather damaged crops in Europe, Canada and Australia.

 

Japan plans bought 195,000 tonnes of milling wheat, including 150,000 tonnes from the US, in a tender today. Taiwan also purchased 77,500 tonnes of US wheat today. Turkey's State Grain Board asked bids for 200,000 tonnes of wheat and 50,000 tonnes of barley as of yesterday (December 6).