Views on commodities and energy
Soybeans sizzle as demand stays hot; US weather ideal for corn
Grain traders took a three-day breather over the holiday weekend with some looking to see if corn was “knee high by the Fourth of July,” but will be right back to keying on the prices of soybeans and soymeal, raging bull markets due to the razor-thin supply of U.S. soybeans.
They say as beans rise or fall, so will wheat and corn.
The U.S. Agriculture Department in its quarterly stocks data last week confirmed soybean stocks are dwindling — 597 million bushels on June 1, down 12 percent from a year ago.
Supplies look to get even tighter if China, the world’s top soy buyer, keeps buying up remaining stocks. USDA confirmed last week that China booked two more cargoes of American soy, 113,000 tonnes, to be shipped before the 2009 harvest begins. On Thursday, USDA also reported China booked 660,000 tonnes of U.S. soybeans for delivery after Sept. 1, a reminder of China’s continuing muscle in the physical grains market.
“Of course we are always watching the Chinese on what they are going to do with the demand on beans,” said Don Roose, an analyst with U.S. Commodities.
So are money managers, with CBOT floor traders citing new inflows of capital into soybeans with the start of the new trading month — and third quarter — on Wednesday. That interest came despite USDA on Tuesday estimating that U.S. farmers are planting a record-high 77.5 million acres to soybeans this spring and summer. Traders say the jury is still out: as of June 28, No. 2 producer Illinois, still had 12 percent of its soybeans to seed, some 1 million acres.
“There are lots of acres dedicated to beans and new-crop prices don’t warrant all that much support. But if speculators continue to buy them, bean prices have the potential to stay strong,” said Gavin Maguire, an analyst with brokerage EHedger.
The spread play between old-crop July soybeans and new-crop November soybeans is also more jarring now that the Chicago Board of Trade July contract is in delivery.
CORN NOW A SUMMER-WEATHER MARKET
Midwest crop weather is also front and center for traders.
“When you’re looking at a summer crop like corn, weather is the only thing that is going to move this market right now,” said Prudential Bache Commodities analyst Shawn McCambridge.
The U.S. corn crop is “made” in July when it pollinates. So far, growing conditions have been nearly ideal west of the Mississippi River and behind to the east but still on track.
“The weather is benign for corn through the middle of July so it’s going to be hard for market to get too excited about corn, especially with the big acreage number USDA came out with,” one veteran Chicago Board of Trade floor broker said.
He cited USDA’s June 30 shocker: U.S. corn acreage at 87 million acres, the second-largest seedings since 1946.
“The driver will continue to be beans and meal,” the trader said of the CBOT grain complex in the coming week.
Photo: Corn knee high by the Fourth of July in northern Illinois, taken by Christine Stebbins