CBOT soybeans go ballistic; rains plague U.S. harvest

September 14, 2008

The Chicago Board of Trade soybean market certainly provided some fireworks on Friday when the September soybean contract shot up a whopping $2.74 a bushel, or 22 percent just before it expired at midday. 
    It caused a few gasps on the trading floor on Friday. But most traders had long ago exited their Sept positions before Friday’s explosion. 
    “I don’t remember anything going that ballistic on the closing day of trade in beans … in wheat, yes but not beans,” one trader said Friday.  
    “Obviously somebody was caught short. There wasn’t a lot of open interest coming in today so it didn’t take much to do it.” 
    The CME Group, parent of the CBOT, said late Friday that after researching their historical data going back to 1972 – it was the biggest move in soybeans since then. 
    A strong cash market helped fuel the explosion. CIF soybean basis bids at the U.S. Gulf for first-half September jumped 75 cents by Friday morning as exporters and processors wrestled for nearby supplies. A combo of tiny year-end stocks and a rain-delay harvest has limited the amount of U.S. beans moving into the pipeline. 
    As far as the week ahead, grain traders will be looking at the bigger economic picture for direction. Early in the week, the biggest driver will likely be crude oil as traders react to whatever devastation that Hurricane Ike may have left behind. 
    The Midwest has already gotten soaked this weekend (7-10 inches in northern Illinois by Sunday morning). The eastern belt could see even bigger rains on Sunday into Monday – a fallout from Ike. 
    No surprise that it is stalling harvest, especially in the south where the crop is ripe. USDA’s weekly crop update issued late Monday will post harvest progress, which is already about 2 weeks behind even before Ike. 
    The National Oilseed Processors Assocation will release its August monthly crush figures before the CBOT markets open on Monday. But with the likely volatility in crude, rains stalling Midwest harvest, and the dollar on a roll it will be on the back burner compared to the bigger macro economic picture. 
    All eyes on what happens with Lehman Brothers. Regulators and bankers resumed a third day of talks on Sunday in a desperate attempt to reach a deal to sell Lehman and prevent the struggling bank from flooding financial markets with assets at fire sale prices. 


The intense rain from Hurrican Ike is causing a loss of electric power in Houston and Galveston to 4 million people and 42% of United States Refinery capacity. This will likely cause Gasoline prices to continue to soar, as they are up 12 cent per gallon in the last two days alone.

The Federal Reserve Board at this weeks meeting will likely be forced to reduce the Fed Funds Rate by 1.5% so as to provide GM and Ford the same low interest rates that their Japanese competitors get, thereby obviating the need for the U. S. Congress to bail out GM and Ford; also thereby providing the necessary low cost Money Supply to bail out the U. S. Economy which Alan Greenspan today characterized as a “one-hundred-year crisis”.

LOOK TO IT, despite the vehement objections of Inflation Hawks Stern, Plosser, and Fisher !!

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