GRAINS-Soybeans nearly flat, pausing after drought rally

August 28th, 2012

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Category: Grains, Oilseeds

(Reuters) – U.S. soybean futures were little changed on Tuesday as the market took a breather following a sell off on Monday when investors took profits after a drought-driven rally lifted prices to contract highs.

Chicago Board Of Trade November soybeans were down 0.04 percent to $17.18 a bushel at 1000 GMT, having fallen 0.74 percent on Monday. Despite rains across the U.S. Midwest last week, the U.S. Department of Agriculture said quality worsened, with the volume of soybeans rated good-to-excellent falling 1 percentage point to 30 percent for the week ending August 26.

“At this stage, the market is focused on harvest and demand rationing,” said Rabobank analyst Erin FitzPatrick.

She said that once the South American plantings begin in September, the market will be looking into weather conditions in major soy producing regions.

New-crop wheat rose 0.06 percent to $8.81-3/4 a bushel after closing down 0.82 percent the previous session, while December corn eased 0.28 percent to $7.98-1/2 a bushel after falling 0.96 percent the previous session.

“Normally at this time of the year, the market is under “Harvest pressure” and the prices start to go down,” French analyst Agritel said.

“Still, a number of operators remain sceptical about the potential drop in prices, given the current tense situation.”

In Europe, benchmark November milling wheat contract at Paris exchange was down 25 cents or 0.10 percent at 260 euros a tonne.

“Many still expect Russia to clamp down on wheat exports despite recent tenders, while Tropical Storm Isaac may be pushing corn prices higher,” said a Sydney-based analyst with an international brokerage who declined to be named as he is not authorised to talk to the media.

ISAAC MAY HURT CORN

Hurricane Isaac was barrelling across the Gulf of Mexico after skimming past south Florida. Based on its current track, it was due to hit the Gulf Coast between Florida and Louisiana Tuesday night or early Wednesday, the seventh anniversary of Hurricane Katrina, which devastated New Orleans.

The storm has already disrupted shipping: grain companies Cargill Inc and Archer Daniels Midland Co shut down some export elevators in Louisiana as a precaution.

Barge traffic along the Mississippi River between Baton Rouge, Louisiana, and the U.S. Gulf has also been suspended. The river is a major channel for the movement of grains produced in the Midwest farm belt to export terminals at the Gulf of Mexico for shipment around the world.

With corn stalk development hindered by the worst drought across the Midwest in 56 years, the high winds could flatten crops, analysts warned.

Farmers have slowed harvests to allow crops to dry after recent rains. The latest U.S. Department of Agriculture harvest progression report, released at the end of trading on Monday, showed the corn harvest was 6 percent complete as of August 26, up just 2 percentage points from a week earlier, and below analyst expectations for 10 percent.

The five-year average for late August is 2 percent complete. A year ago, farmers had harvested 2 percent of the corn crop.

But Isaac could boost winter wheat plantings, with the World Weather Inc forecasting the drought-parched Midwest farm belt could get up to 5 inches of rain.

Wheat prices had fallen for the past five sessions as concerns over production from the Black Sea eased. The pressure was further fuelled on Monday when Egypt, the world’s largest consumer of wheat, bought 180,000 tonnes of Russian and Romanian wheat for October 1-10 shipment on a free-on-board basis, the main government wheat buyer said on Saturday.

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