Soymeal futures surge over 5% after Argentine weekend washout

18.01.2017

Soymeal futures surged over 5%, to a six-month high, on fears that the Argentine soybean crop has been hit by flooding, too late for replanting, with soybean prices up sharply as well.

As Chicago markets started up after the long holiday weekend, traders got to grips with heavy rains which hit key argentine growing regions.  

"Moderate to heavy rainfall favoured northern and central Argentina over the holiday weekend, with eastern Cordoba, Santa Fe, western Entre Rios, and far northwestern Santa Fe receiving the heaviest amounts," said Kyle Tapley, at MDA Weather Services.

"The rainfall was heavier than expected across central Argentina and once again increased wetness concerns and stalled any fieldwork," Mr Tapley said.

Surging soymeal prices

March soybean futures were up 2.2% in afternoon deals in Chicago, at a six-month-high of $10.69 ѕ a bushel.

And prices for soymeal, of which Argentina is the world's top exporter, rose even more sharply.

March soymeal futures were up 4.6% in Chicago, at $349.40 a short ton, having reached as high as $352.40, a six-month-high.

Risk premium

Jerod Kitt, at Linn Group, told Agrimoney that uncertainty over the extent of the damage was supporting prices.

"In the US, if there is talk of flooding, you can go and see it yourself," he said.  

"The market information on what is happening in Argentine is not as high."

 "In Argentina, that visibility, it's not there, and the market seems to be playing it on the safe side," Mr Kitt said, explaining the move to inject risk premium into prices

Dryness fears in the south as well

"Analysts estimate 10% or more of Argentina growing region could be effected by excess rain," said CHS Hedging.

"One private forecaster lowered his Argentina soybean estimate by 4m tonnes, to 51m tonnes," well below the 57m tonnes at which the US Department of Agriculture on Thursday pegged the harvest.

Kim Rugel, at Benson Quinn Commodities, noted that there are also concerns over dryness in southern Argentina.

"The longer range forecast is calling for continued dryness in the south, resulting in lower yields," Ms Rugel said.


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