Once again, the soy complex — in particular soybeans and soybean oil — dominated the moves in Chicago ag markets this week, moving in line with soaring Asian vegetable oil markets. 
    “The world markets have come to forefront this week. We are going to be very nervous with the tight stocks and particularly the inflation situation in China, Europe and the United States,” said Gordon Linn, president of The Linn Group in Chicago.
    Many Chicago traders expected a correction in soy prices this week. But the Asian vegetable oil markets were red hot as demand for edible oils to meet food and fuel demand is escalating. Malaysian palm oil futures hit a nine-year high and the spot Chicago soyoil price pushed to near a 23-year top this week.
    Asia’s appetites tend to dazzle CBOT trading pits. There was talk among traders that China, India and Bangladesh bought huge amounts of soybean oil, roughly 150,000 tonnes, mainly out of Argentina, and that China also bought canola and rapeseed.
    Traders also continue watching U.S. Midwest weather as this is the time of year when any change in a forecast can move prices. One of Chicago traders’ favorite forecasters to watch is WGN’s Tom Skilling, a respected weather wonk whose noon updates are on TV’s all over the grain floor.
    Skilling on Friday had rain moving into the eastern U.S. Midwest which has been dry. If good rains move through, it should spell selling early next week, especially in corn.
    CBOT corn prices have been range-bound the past month as current estimates are projecting U.S. farmers to harvest their biggest crop in history — 13 billion bushels — if all goes well this summer.
    The government gave the corn crop high marks in its first ratings report of the year, grading 78 percent in good to excellent condition last Monday. USDA will update its ratings on Tuesday after the Memorial Day holiday, with traders expecting corn ratings to stay steady or drop slightly.
    But there’s a lot of time until October harvest so volatility is sure to pick up during what is expected to be the long hot summer.
    Wheat was on roll this week as worries about a tight global stockpile rallied prices. A combination of dryness in Europe and excessively wet weather in the key U.S. wheat state of Kansas has analysts shaving the world’s crop output.
    The same inputs will be watched next week: Asian vegetable oil markets, U.S. Midwest weather, crop condition ratings and European weather. It seemed that veteran grain traders had more on their minds that price volatility. They watched their shares of CBOT climb over $200 this month as the Chicago Mercantile Exchange and the IntercontinentalExchange Inc. wrangle over who will buy them. Next week should be telling as ICE’s CEO Jeffrey Sprecher will meet with CBOT members on May 31.

(Photo: U.S. Department of Agriculture, Scott Bauer)

Prospects for increased soybean oil demand due to the biodiesel boom along with a rally in gasoline and crude oil prices on supply worries sent Chicago Board of Trade soybean and soyoil markets to multi-year highs this week.
    Given the rally some traders expected soy prices to set back a little early next week, especially after trade data from the Commodity Futures Trading Commission confirmed that commodity funds expanded their net long positions in both.
    “The market had a little bit of stall out. We’re going to have to watch that next week,” Don Roose, analyst with U.S. Commodities, said of beans and oil. “You could see a break if we get rain in the eastern Corn Belt.”
    Rain in the Midwest could keep farmers from wrapping up corn planting, which could cause some intended corn acres to be switched over to soybeans, which have a shorter growing season than corn.
    CBOT traders are also watching the CBOT July/September corn spread, an old-crop/new-crop bet that turned volatile this week. July corn is now trading at a 2-cent premium to September — spooking many to exit their July positions. The strength in the July/Sept spread coincided with strong cash markets.
    Ethanol manufacturers, feedlots, processors and other end-users are fighting for corn, having problems originating supplies as farmers have stopped selling with the focus on planting.
    “Because of that, it is sucking corn away from the river and making the Gulf hard to originate too” for export obligations, Roy Huckabay, analyst with The Linn Group, said of barge loading elevators on the Illinois and Mississippi rivers.
    All that said, weather will continue to be a prime daily mover for the markets. Traders are turning their focus to growing conditions and less on planting progress. But parts of the western Corn Belt are still well behind on seedings due to all the rain they’ve had this spring.
    On the wheat front, traders were watching world weather: welcome rains fell in Australia this week but dryness in China is still a worry, with outlooks for tight world stocks into next year. Talks with India this week have renewed hopes for U.S. wheat sales this year but there’s also the coming U.S. hard red winter wheat harvest next month, which tends to be a seasonal downer for prices.

There’s nothing like perceived changes in the weather to stir a little buying interest in corn. 
    Even though the week ended May 4 was pretty clear in the Corn Belt for planting corn, calls for rain next week sent shivers through the market — sparking fresh buying.
    To assure maturity before the autumn frost, Midwest farmers try to get all their corn planted by May 15. This year’s seedings are projected as the most in 60 years, fed by the rampage toward biofuels like corn-based ethanol.
    Cold, rainy weather has kept farmers in the Midwest far behind on corn, however. Even with clear weather and 32-row planters, farmers still lag.
    CBOT floor traders on Friday said they expect only 50 percent of the corn crop will be planted by the weekend, down from the usual 64 percent for the first week in May. The government will provide its weekly number on Monday afternoon.
    Fewer corn acres usually means more soybeans, which are planted after corn with a shorter growing season. So, as one would expect, the corn scenario fed CBOT soybean sales.
    It bears repeating: the weather is pretty much the only factor CBOT traders are looking at until mid-May. So if corn prices spike around midday, it will tell you that updated  weather outlooks are still wet for the Midwest.
    “There are still fears that if we don’t plant the corn, then we’ll plant more beans. We’re in that time of year when we’re trying to sort out a big issue — and that’s acres,” said Don Roose, president of Iowa brokerage U.S. Commodities.
    The wheat market took a big hit this week as this year’s winter wheat crop seemed to jump out of its coffin.
    Scouts on their annual field inspections of Kansas, the top wheat state, said that overall this year’s crop looked better than expected despite a hard spring freeze. They projected a bigger crop than last year’s annual tour.
    Traders on Friday will be watching for the government’s first first crop projection for 2007 U.S. winter wheat. So far, analysts expect gains — about 300 million bushels more than last year’s crop.
    An interesting detail to watch will be what effect all the rain in the central and southern Plains may have on the hard red winter wheat grown there. Warm, wet weather raises the risk of fungal diseases that can potentially ruin quality. 
    
    –Commodity Futures Trading Commission commitments of traders data on May 4 showed that funds remained net short in CBOT wheat futures but expanded their longs in corn, soybeans, soyoil and soymeal. All that was as expected. Some said the corn fund long might be a little bigger than expected. If weekend weather forecasts for next week get drier, that fund long could add corn selling pressure on electronic screens on Sunday night or in the pit on Monday morning.