Heat Sends Soybean Futures Jumping

On June 20, 2012, in Soybean futures news report, by Infinity Trading

June 19th, 2012

Soybean futures closed sharply higher Tuesday, jumping on worries about dry weather damaging crops while export demand remains strong.

Soybeans for July delivery settled up 49 1/2 cents, or 3.6%, at $14.33 3/4 a bushel at the Chicago Board of Trade. November soybeans rose 45 1/4 cents, or 3.4%, to $13.84 1/2 a bushel, the highest close for the contract since May 1.

July soybean meal rose $15, or 3.6%, to $427.90 a short ton. July soybean oil rose 1.68 cents, or 3.4%, to 50.44 cents a pound.

The National Weather Service currently predicts below-normal chances of rain across the Midwest in the six-to-14 day period, and above-normal temperatures in much of the region.

Dry weather has already taken a toll on the U.S. soy crop, which was 56% in good or excellent condition as of Sunday, down from 60% the prior week, the U.S. Department of Agriculture said Monday. The drop was greater than analysts expected.

As the U.S. faces a potentially smaller crop yield due to the unfavorable weather, demand is still running strong. The USDA on Tuesday said private exporters reported a sale of 140,000 metric tons of soybeans for delivery during the 2011-12 marketing year to “unknown destinations”–a term that traders often assume refers to China, the world’s largest importer of soybeans.

Technically driven trading helped drive the rally. For July soybeans, one indicator that drove buying was the contract surpassing its moving average for the last 55 days, or the last 11 trading weeks, said Dave Marshall, an independent grain-marketing adviser in Nashville, Ill.

“The technical chart action combined with the weather action has given fundamental and technical traders reason to be buyers,” Mr. Marshall said.

More fuel for the jump in soybeans may have come from strengthening cash markets for soybeans in Brazil, reflecting supplies there being drained quickly after the country’s recent harvest, said Sterling Smith, an analyst for Citigroup Global Markets in Chicago.

“That tells me beans are getting harder and harder to find,” he said. “If you combine this with Argentina’s short crop, that leaves really the United States as the bean provider to the world.”

Analysts expect greater demand for U.S. soybeans this year after drought shrank the soy crops in key producers Brazil and Argentina earlier this year.

Corn futures also closed higher, boosted by a decline in the crop’s condition rating in the USDA report Monday, and by worries that hot and dry weather could further stress the crop.

July corn futures rose 13 cents, or 2.2%, to $6.12 1/2 a bushel. December corn rose 29 1/2 cents, or 5.5%, to $5.63 1/2 a bushel, the contract’s highest level since March.

Wheat futures ended mostly higher. They were boosted by corn’s gains and by expectations for lower wheat production in regions including southern Russia and Australia. Andrey Sizov Sr., chief executive of SovEcon, said Tuesday that the Russian agricultural analysis body forecasts the country’s wheat crop at 50 million metric tons for the 2012-13 crop year, down from around 56 million tons in the prior year.

CBOT July wheat rose 19 1/4 cents, or 3.1%, to $6.49 1/2 a bushel. Kansas City Board of Trade July wheat rose 19 1/2 cents, or 3.0%, to $6.70 a bushel. MGEX July wheat fell 4 cents, or 0.5%, to $7.98 1/2 a bushel.

- Owen Fletcher at Doe Jones Newswire.