Soybean prices bounce back on month-end bargain buying

01.08.2016

Soybean futures surged on bargain buying, at the end of a dismal month.

Front-month soybean futures are down some 13% on the month, thanks to easing weather worries in the US Midwest.

"The break in soybean prices later yesterday and in the overnight trade pushed the November soybean contract down $9.68," said Darrell Holaday, at Country Futures.

"From a technical standpoint, this market was oversold at that level," he said.

Dollar support

The US dollar slumped in the wake of some weak US economic data, down 1.0% against a basket of world currencies as US markets closed, supporting dollar-denominated asset prices.

And there was support from the demand side of the balance sheet, as the USDA announced another 120,000 tonnes soybean sale, to an unknown destination.

"The reality is that the weather leans negative, but the export business (demand side of the market) is pushing the soybean complex higher today," Mr Holaday said.

Near the bottom?

Agricultural futures have fallen across the board this month, as the US grain marches steadily toward completion with weather worries melting away.

But Tregg Cronin, at Halo Commodities, suggested the selling might soon come to an end.

"Seasonally, we are probably closer to a bottom than most think, especially if weather-based and condition based-yield models will be topping out in August," he said.

"The market wants to know what is out in the field and how the next 2-weeks will affect soybean development," Mr Conin warned.

"Probably a waiting game until then, but corn demand remains strong, farmers aren't selling wheat and the soybean yield is still a question mark."

Rain threats

And one perhaps unexpected threat to corn and soybean crop prospects comes from the rains this month, which were seen as bearish for prices.

For months, markets have been on edge over the prospect of heat in the US Midwest, hitting corn and soybean prospects there.

But the recent rains, which reduced the likelihood of heat damage, bring their own risks.

"The drenching rain in July has coincided with the pollination period in corn, boosting the yield potential," said forecaster Gail Martell.

"However, disease is a growing concern in a wet environment," she warned.

As well as powdery mildew, rust, and grey leaf spot, Ms Martell warned that "soybeans may be subject to Sudden Death Syndrome from excessively wet conditions and high humidity".

"This is a fungus disease that often emerges in August, when soybeans are filling pods," she said.

"Though some soybean varieties are rated as having resistance to this disease, there is no variety that is totally resistant to SDS, plant pathologists claim."

Soybeans, corn finish up

November soybean futures finished up 2.4%, finishing the month three cents over the psychologically important $10 a bushel mark.

December corn futures finished up 1.0% on the day, at $3.42 ѕ a bushel.

September wheat futures finished down 0.3%, at $4.07 ѕ a bushel.

Real soars

The Brazilian real soared against the dollar, up 1.5% in afternoon deals, supporting sugar and coffee prices.

The rising real helped sugar markets shrug off data from the Brazilian cane body Unica, which showed sugar output in the country's Centre South region in the first half of July at 2.82m tonnes, up from 2.79m tonnes in the second half of June.

This was near-double the 1.45m tonnes achieved during the same period of last year

Cumulative Centre South sugar output so far this season is now running 30% ahead of last year, at 13.8m tonnes, Unica said.

But the strength of real is supportive for sugar prices, as it reduces local currency returns for cane crushes in the world's top sugar exporter.

October raw sugar settled up 1.3%, at 19.05 cents a pound.

Slowing world exports

Prices for coffee, of which Brazil is also the largest producer, firmed as well.

The International Coffee Organisation reported global coffee exports down 11% in June, compared the same time last year, to 9.03m 60-kg bags.

September arabica futures settled up 2.9%, at 146.20 cents a pound.

September robusta futures in London settled up 1.9%, at $1,848 a tonne.


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