Glacier FarmMedia | MarketsFarm – A combination of factors led the Chicago soy complex to slide back at the Chicago Board of Trade on Dec. 18, the low point of a tough week for grain and oilseed futures.
The March soybean contract lost 25.5 U.S. cents per bushel on Dec. 18 to close at US$9.5325/bu., down 49.5 U.S. cents from one week earlier. On the same day, March soymeal was slashed US$7.50 per short ton at US$286.10, which was US$12 less than the previous week. March soyoil fell below 40 U.S. cents per pound on Dec. 18 for the first time since September to close at 39.93, down 2.78 from Dec. 11.
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Ryan Ettner, trader for Allendale Inc. in McHenry, Ill., listed off reasons for the sharp drop: favourable South American weather, a stronger United States dollar, and uncertainty over the U.S. government’s plans for the biodiesel industry.
He added the trade had already priced in a potential slowdown in U.S. soybean exports.
“To this point, we haven’t seen anywhere near the slowdown what (the trade has predicted). Even saying that, trade is still fearful that bean exports could come to a grinding halt any day,” Ettner said.
The possibility of a sharp reduction in U.S. soybean exports was described as a “what-if” by Ettner which could lower soybean prices even further. A U.S. government shutdown, which also would’ve been harmful to soybean prices, was averted on Friday after Congress approved a new spending plan to be put in place until March.
“If (these issues) do happen, it doesn’t mean another washout in beans, but there would be a moderate grind lower,” he explained, adding that fair value for soybeans would’ve been at US$10.35/bu.
Soybeans’ weak performance spilled over into corn and wheat. The March corn contract lost 11 U.S. cents/bu. to close the week at US$4.3725. The Chicago March wheat dropped 22 cents/bu. at US$5.4125, while Kansas City March was down 18.5 cents/bu. at US$5.4875 and Minneapolis March declined 15 cents/bu. at US$5.92.
The U.S. dollar strengthened on Dec. 18 after the Federal Reserve announced a cut of 25 basis points to its key interest rates. This negatively affected wheat prices more than those for corn and soybeans, Ettner noted.
“(Wheat’s) correlation with the dollar has been pretty strong,” he said.
The USDA is scheduled to release its weekly export sales report on Dec. 19, which will help guide the futures through to Christmas.
“I have every reason to assume a grind higher for corn and slightly higher wheat (over the next two weeks). But for beans, it depends whether they can bounce back over the next three days,” Ettner said.
