Soybeans struggle to execute Thanksgiving rally

November 26th, 2014

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Category: Grains, Oilseeds

Soybean Harvest 450x299(AgriMoney) – Soybean futures have a habit of rising on the day before Thanksgiving, and the day after.

But they were struggling in early deals to realise such a feat, as soymeal, whose rally in the last session did so much to boost sentiment across grain markets, struggled to make further ground.

Indeed, December soymeal stood just $0.70 higher at $391.30 a short ton as of 09:05 UK time (03:05 Chicago time), given little help by a modest reaction on China’s Dalian exchange to the 4% jump in in the last session in Chicago futures.

Dalian soymeal for May added just 0.5% to 2,864 yuan a tonne, while soybeans themselves for May eased 0.1% to 4,254 yuan a tonne.

Anne Frick at Jefferies, flagging “widespread talk” about US soymeal being “priced out of the export market”, said that “it appears that prices will need to decline, especially given the high crush margins.

“It may well be that the highs in soymeal were seen last week.”

‘No surprises’

Soyoil was not in such good form either, down 0.3% at 33.48 cents a pound for January delivery, undermined by an Oil World forecast that

As for soybeans themselves, they dropped 0.4% to $10.46 ¾ a bushel for January, also undermined by scepticism over a forecast from the US Congressional Budget Office that soybean sowings will fall 3.2m acres to 81.0m acres.

“The CBO is a preliminary baseline number used to help the administration set a budget for 2015, and in no way determines actual acreage planted for 2015,” Terry Reilly at Futures International said.

“We see no surprises in the planted numbers.”

Thanksgiving vs Christmas

If it is a consolation to those hoping for higher soy prices, there is also a Chicago saying that “if bears enjoy the Thanksgiving dinner, bulls will have a Christmas feast” – implying a rise in values ahead, assuming a poor performance for the rest of this week.

But that may not bode so well for wheat, which managed a firmer start, adding 0.2% to $5.58 ¾ a bushel in Chicago for March delivery, given a little help by the data late on Monday showing deterioration in US winter crop condition, which might have been expected to cause bigger waves in the last session.

“Note the deterioration of the hard red winter wheat crop in areas of Nebraska that saw extremely cold temperatures” during last week’s freeze, said Brian Henry at Benson Quinn Commodities.

The proportion of Nebraska wheat overall rated “good” or “excellent” tumbled 9 points week on week, leading the drop of 2 points to 58% in the national rating.

‘Case for higher premiums’

At Commonwealth Bank of Australia, Tobin Gorey noted that agricultural meteorologists “have not been overly worried about the combination of poor establishment and cold weather in the former Soviet Union and the US”.

“The world will lose some wheat but not enough to move us too far from a comfortable supply position.

“Nonetheless, even in that context there might be a case for the higher quality wheats to trade at larger premiums,” he said.

And there are some concerns over wheat quality in South America too, with excessive rains the issue, as they have been in some many other parts of the world.

“The overall quality/quantity of South American wheat and the hiccups in Argentina’s ability to execute sales will also draw some attention,” Mr Henry said.

“To this point, we haven’t seen evidence of Brazil looking to the US for supplies”, with the South American country a structural importer, largely of hard wheat, and the US a key alternative origin if

However, he forecast that Brazilian buyers “will show some interest into the spring timeframe”.

Australian prospects

One country where concerns appear to be waning is Australia, where Mr Henry noted that yields are “typically being considered decent”.

At Chicago-based RJ O’Brien, Richard Feltes said that “new crop Australian wheat yields are exceeding expectations”,

The latest report on South Australia’s harvest, from GlencoreXstrata’s Viterra, said that “growers are generally reporting better than expected yields given the dry spring conditions and frosts experienced in some areas”.

National Australia Bank forecast a drop of only 10.3% in Australia’s wheat harvest this year, implying a crop of some 24m tonnes, well above estimates of 22m-23m tonnes that other analysts have been honing in on.

Corn, cotton follow

Corn, meanwhile, remained a follower, trapped between soybeans, its main rival for acreage in South America planting programmes, and wheat, a key competitor for use in livestock feed.

Futures for March stood 0.1% higher at $3.87 ¾ a bushel.

The Congressional Budget Office preliminary estimate for US corn sowings next year came in at 90m acres, a drop of 900,000 acres.

In New York, cotton, another competitor with corn and soybeans for planted area, was reluctant to stray too far, easing 0.2% to 59.18 cents a pound.

“The market continues to trade in a very narrow band,” CBA’s Tobin Gorey said.

Weather-wise, “South American region moisture is fine and forecasters expect further rain to bolster that this week.

“Weather forecasters still expect patchy useful rain and high temperatures in Australia’s cotton regions.”

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