Market News

Soybeans drop on weather, outside markets: July 7, 2009

Soybeans were sharply lower, hitting two month lows, on speculative selling, technical weakness, profit taking and spillover from the outside markets. The dollar was higher while the Dow Jones Industrial Average and crude oil were sharply lower because of the general jitters connected to U.S. and global economic health. Also, crop weather remains good across most of the Midwest, with non-threatening conditions seen over the near term. Still, the strong fundamentals kept beans from closing limit down. Soybean meal was mostly limit down and soybean oil was lower with both pits following beans. Losses in oil were limited by product spread trade. Brazil’s National Commodities Supply Corp. pegs that nation’s 2008/09 soybean crop at 57.1 million tons, unchanged from the June estimate and down 4.8% from 2007/08’s total of 60 million tons following widespread weather issues. Crop productivity was 6.6% below the 2007/08 level.

Corn was lower on spillover from beans, technical selling and outside market direction. The generally good growing weather is, of course, also a negative for corn. Traders are getting ready for Friday’s USDA supply and demand update, with analyst Allendale Inc. pegging this year’s crop at 12.288 billion bushels with no adjustments to yield, which would push new crop ending stocks over 1.3 billion bushels. If realized, that would be the second largest corn crop in U.S. history. Still, nearby contracts did see gains at points on oversold signals and spread trade with beans.

The wheat complex was lower on spillover from beans, fund selling and the higher dollar. It was an up and down session with occasional higher trade on oversold signals, the unwinding of spreads with beans and short covering. However, contracts couldn’t hold on due to the bearish fundamentals, spillover from beans and harvest pressure in Chicago and Kansas City. Contracts have lost a lot of ground since the start of June and are quite oversold, which could provide support in the near future. European wheat was “flat in thin volume” according to Dow Jones Newswires. Japan’s Ag Ministry says it will not issue a wheat tender this week without citing a reason. Australia’s Bureau of Statistics reports that as of the end of May, grain stocks totaled 9.2 million tons, with 8.7 million tons of that wheat and 6.8 million tons of wheat feed grade. The Philippines have reinstated the 7% import tax on feed wheat eliminated last year to help stabilize food prices. Ukraine’s Ag Ministry states that 7.2% of that nation’s wheat crop has been harvested, around 1.18 million tons.