Soy at 2-week low on harvest pressure, pre-USDA caution

September 11th, 2012

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Category: Grains, Oilseeds

(Reuters) – U.S. soybean futures slipped to a two-week low on Tuesday, falling for a fifth consecutive session, as quicker-than-expected harvest progress together with caution in the run-up to closely watched crop forecasts kept prices under pressure.

Corn rose slightly but remained close to a six-week low touched in the previous session as the corn market also stayed cautious before Wednesday’s U.S. Department of Agriculture estimates that will give a clearer picture of the impact on supply and demand from the worst U.S. drought in 56 years.

Wheat edged higher with corn, with operators also awaiting the outcome of a latest tender by Egypt, the world’s top wheat importer, to see if dwindling Black Sea supply after drought-hit harvests would shift demand towards other exporting zones.

Chicago Board of Trade new-crop November soy was down 0.1 percent at $17.17-1/4 a bushel by 1046 GMT. It earlier fell to $17.10-3/4, a level not hit since Aug. 28.

December corn edged up 0.4 percent to $7.86-1/4 a bushel, not far from Monday’s six-week low of $7.81.

The USDA’s first update on this year’s soybean harvest showed on Monday that crop was 4 percent harvested, against expectations for 3 percent.

The USDA’s weekly crop progress report also showed the condition of soy plants had improved, reinforcing market sentiment that some parts of the drought-ravaged Midwest benefited from rain towards the end of the growing season.

“Seasonal harvest pressure has helped to bring near-term futures and cash bids lower in recent days,” Societe Generale analyst Christopher Narayanan said of soybeans.

“We expect prices to remain elevated on tight supplies, but are bearish (against) the current forward curve.”

Both soybean and corn futures have set record highs during the U.S. summer as drought has slashed harvest prospects at a time when stocks of the crops were already low.

Wednesday’s USDA supply/demand report will be particularly scrutinised to see if more swingeing supply cuts are made due to the drought and to what extent demand has been cooled by surging prices.

“Everyone is looking forward to the USDA report and we are likely to see pressure on corn prices ahead of the report as much of the bad news has been factored in,” said Lynette Tan, investment analyst at Phillip Futures in Singapore.

Analysts predict the USDA report will show that the worst drought in 56 years has slashed nearly 5.0 billion bushels off the corn crop, according to a Reuters poll, or about $40 billion worth at current prices.

For soybeans, analysts on average predicted the USDA will trim its crop forecast to 2.657 billion bushels from 2.692 billion in August. However, there is uncertainty as some expect a slight increase because of Midwest rains last month.

Unrelenting demand from exporters and domestic processors for soybeans could depress projected soy inventories to the lowest level in 36 years, the poll showed.

 

EGYPT TO BUY OUTSIDE BLACK SEA?

On wheat markets, CBOT December wheat slid 0.3 percent to $8.91-1/2 a bushel, while November milling wheat in Paris eased 0.7 percent to 263.50 euros a tonne as it factored in Wednesday’s closing slide in Chicago.

Analysts continued to see bullish momentum for wheat prices given drought-reduced supply in Black Sea countries and an unfavourable start to the growing season in Australia.

“I think there is still some upside potential as the market is expecting Russia to take action to limit exports,” said Tan. “We also have Australian wheat crop facing adverse weather.”

Australia cut its forecast for wheat production in the 2012/13 crop marketing year by about 7 percent from its previous forecast to 22.5 million tonnes, warning that there was a risk of yields falling further if rains did not arrive in some areas.

A new import tender being held by Egyptian stage buyer GASC on Tuesday is attracting attention as the shipping period of November is thought to give a chance to western European origins such as France as Black Sea availabilities run low.

Black Sea origins led by Russia have enjoyed a clean sweep of sales to GASC so far in 2012/13.

Russia’s government have repeatedly rejected the idea of imposing grain export limits, but market players widely believe exports will run dry in the next couple of months whatever action the authorities take.

Echoing market expectations, Ukraine’s agriculture ministry said on Tuesday that monthly wheat exports should fall sharply from November or December as traders deplete an agreed quota aimed at ensuring stable local bread prices following decline in the wheat crop.

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