October 5, 2010

US soy futures decline as favourable weather aids harvest, planting

Soy fell to a two-week low as dry weather allows US farmers to accelerate the harvest, while rain improves crop conditions in Brazil and Argentina.

The US Midwest will be mostly dry for the next 10 days, keeping the ground firm for the heavy equipment used to collect crops, according to reports. In South America, rain that fell last week and more precipitation over the next 10 days will improve soil moisture for planting. The US is the biggest producer and exporter, followed by Brazil and Argentina.

Soy futures for November delivery fell 3 cents, or 0.3%, to close at US$10.54 a bushel at 1:15 p.m. on the CBOT, after earlier touching US$10.42, the lowest level since September 17. The price dropped 6.1% last week, the most in 13 months.

On September 27, the commodity reached an eight-month high of US$11.44 on speculation that rains would damage US crops and dry weather would delay planting in South America. The oilseed surged 23% in the third quarter.

The US soy crop will reach 3.571 billion bushels, analysts forecast, up from previous September forecast of 3.39 billion. The USDA last month predicted 3.483 billion bushels, up from last year's record of 3.359 billion. The department will release its third, survey-based forecast of the harvest on October 8.

Prices also fell as November futures dropped below the 40-day moving average, increasing speculative-fund liquidation of wagers that prices would climb, analysts said.

As of September 28, hedge funds and other large speculators held a record bet on higher soy prices, data from the Commodity Futures Trading Commission show. Speculative long positions outnumbered shorts by 159,794 futures and options on the CBOT, up 6.6% from a week earlier. On June 29, they were net long 16,649 contracts.

The US soy crop was valued at US$31.8 billion last year, second only to corn, government figures show.