May 25, 2010

 

US soy futures rise despite soaring dollar

 

 

US soy futures rose on Monday (May 24) despite a soaring dollar as the cash market firmed on persistent talk that soy export orders were being switched to the US from South America providing a boost to soy futures.

 

Slow farmer selling in South America and in the US combined with the firm cash market, weaker freight rates and active demand by soy processors boosted soy futures.

 

US soy processors had to increase cash basis bids to buy soy as a result of the slow pace of farmer selling. Traders and analysts said the grain markets shrugged off the 1% jump of the dollar index as the euro fell following news the Spanish central bank had taken over a savings bank, adding to jitters about debt problems in the euro zone.

 

A firm dollar often weighs on US grain markets because theoretically a strong greenback makes US commodities more expensive for importers to buy.

 

Meanwhile, corn futures gained on spillover from higher soy and on prospects for China to buy more US corn. China purchased corn for the first time in nearly four years last month and has continued to buy US cargoes which are cheaper than domestic supplies.

 

Despite the increased US imports, a top Chinese grain administration official said on Monday the country could dip into its strategic corn reserve to contain domestic prices after selling its temporary reserves.

 

Short-covering amid signals the market remains heavily loaded with managed fund short sellers lifting wheat futures.

 

US soy for July delivery was up 5 cents per bushel at US$9.46 and new-crop November was up 12-1/4 at US$9.19-1/2. July corn was up 3-1/4 at US$3.72-1/4 and July wheat was up 1 at US$4.73.

 

Traders said some unwinding of July-November bull-spreads was lifting November soy relative to July.

 

The July-November spread began to narrow late last week after widening to nearly 40 cents per bushel, premium July, a point that often brings in profit-taking or a correction of that spread, analysts said.

 

Also, soy futures rose ahead of the USDA releasing its weekly crop condition and planting progress report late on Monday that may show rain slowed soy seeding in the US Midwest.

 

Analysts said rains have hampered plantings in many areas and the trade may be somewhat mildly disappointed with Monday night progress.

 

An average of analysts' estimates pegged soy seedings at 56% complete, up from 48% a year ago, but the estimates varied widely from 38-65%.

 

The weather outlook is more favourable this week with mostly above average temperatures and drier weather forecast for the next 6-10 days.