Market News

Soybeans rally on tight supply and strong demand: July 1, 2009

Soybeans hit new two week highs on speculative and technical buying, along with some outside market direction. Crude oil was lower, but the dollar index was down and the Dow Jones Industrial Average was higher. The fundamentals for soybeans remain supportive with a tight supply and strong demand. Crop weather’s good over the near term, but there’re still some beans to be planted and there’s a long time left in the growing season. Also, there’s a chance for a heat ridge to return to the Midwest next week and with the supply this small, there’s not much room for error. Soybean meal hit two week highs and soybean oil was higher with contracts supported by soybeans. The USDA corrected the date of arrival for 113,000 tons of U.S. soybeans from 2009/10 to the current marketing year 2008/09. The USDA’s weekly export sales report is out Thursday at 7:30 AM Central. Soybeans are pegged at 100,000 to 425,000 tons, meal is seen at 75,000 to 300,000 tons and oil is placed at 0 to 60,000 tons.

Corn closed higher on short covering, technical buying and spillover from beans. Near term crop weather continues to look good, those USDA planted area numbers were definitely a negative and there was light follow through from the mostly limit down finish Tuesday. Still, it’s only the first of July, so there’s a long way to go with this year’s crop and contracts were oversold following Tuesday’s drop. According to David Kohli, with the recent decline in price, around $1 since the start of June, commercial demand is picking up. Ethanol futures were mostly higher. The Buenos Aires Grain Exchange reports that almost 98% of Argentina’s corn crop has been harvested with production pegged at only 12.5 million tons because of drought. South Korea’s Major Feedmill Group issued a tender for 55,000 tons of U.S. corn. Weekly U.S. corn sales are expected to be between 500,000 and 900,000 tons.

The wheat complex was lower on technical and fund selling. Chicago and Kansas City picked up additional pressure from harvest related selling. Minneapolis was lower on the fairly good condition of the hard red spring crop. Fundamentally, the outlook for wheat remains quite negative with a large available global supply and slack demand, especially for U.S. supplies because of the premium over other origins. However, U.S. wheat is generally much higher quality, which was reflected in Egypt’s purchase of 60,000 tons of U.S. soft red winter and 30,000 tons of French wheat; Egypt’s typically not a big buyer of U.S. wheat, but has looked elsewhere with the recent quality problems surrounding Russian wheat. European wheat was steady to firm on technical buying, but gains were limited by harvest pressure; November Paris was steady and November London was up .7%. According to the Buenos Aires Grain Exchange, Argentina’s wheat planting continues to move much slower than average with less than half of the crop in the ground because of insufficient soil moisture. Japan’s Ag Ministry will issue a tender for 30,000 tons of feed wheat and 200,000 tons of feed barley on July 8, according to Dow Jones Newswires. Weekly wheat sales are estimated at 200,000 to 400,000 tons.