Best-traded soybean futures drop below $10

September 10th, 2014

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Category: Oilseeds

(Agrimoney) – Chicago’s best-traded soybean futures contract dropped below $10 a bushel for the first time, weighed by growing confidence in a huge US harvest, crossing a rubicon some analysts believe could signal a further strong price decline.

November soybean futures touched $9.94 a bushel on Tuesday, the lowest ever level for the contract, before recovering some ground to stand at $9.97 ¾ a bushel at 09:30 local time (15:30 UK time, down 1.1% on the day.

The decline reflected reduced concerns that cooler US temperatures later this week will bring widespread frost to the Midwest, potentially ending prematurely development of a crop which is lagging in its maturity, while early results from the South remain strong.

“Big crop ideas continue to hang over the soybean market,” CHS Hedging said.

‘Highest rating in 20 years’

Indeed, the US Department of Agriculture overnight rated the crop at 72% “good” or “excellent”, a historically high number.

“Soybean crop conditions are the highest in 20-years, matching 1994,” said Terry Reilly at Chicago broker Futures International.

The USDA is expected later this week to raise its forecast for the US soybean yield from the current forecast of a record 45.4 bushels per acre, with investors expecting an upgrade to 46.3 bushels per acre.

And hopes are high for South American soybean crops too, with AgroConsult on Monday lifting to 95.1m tonnes its forecast for the Brazilian crop harvested early in 2015, and 56.6m tonnes for Argentina.

The US Department of Agriculture, whose estimates set world benchmarks, has the figures at 91m tonnes and 54m tonnes.

Earlier on Tuesday, Brazil’s Conab bureau nudged higher by 460,000 tonnes to 85.12m tonnes its estimate for the country’s newly-harvested crop, although this remains below the USDA figure of 87.5m tonnes.

‘Significant liquidation’

And the fall below $10-a-bushel mark itself may provoke further declines, in illustrating the inability of buying pressure to keep prices above a psychologically important level, some investors believe.

“Last few times we crossed below $10.00 a bushel [November basis] was 2008 and 2009, and both of those years saw significant liquidation and price accelerations shortly after falling below this crucial level,” one US broker said.

In 2008, when price moves showed “some similar characteristics to 2014”, the contract expired below $8.80 a bushel.

“Granted this was during the financial crisis which certainly had an impact on commodities, but it is a good representation of how fast this market could break during a sell-off.”

Expiry ahead

The November contract will next week takeover as the spot contract, after the expiry of the September lot, which was trading on Tuesday at $10.94 ½ a bushel.

A spot contract has not stood below $10 a bushel since September 2010.

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