U.S. soybeans fell nearly 3 percent to their lowest level in over a year on Thursday, and soymeal dropped its daily trading limit of $20 per ton for the second day in a row on falling cash markets.
Traders and analysts said end-users were beginning to quit buying expensive old-crop supplies on prospects for a record large soybean crop and lower prices in the future due to good U.S. weather. An increase in farmer selling of their remaining supply of old-crop soybean stocks also hit prices.
Corn fell for the fourth day in a row and dropped to a new contract low, while new-crop December plunged to a 2-1/2-year low on outlooks for a bumper harvest this autumn.
Wheat eased on plentiful global stocks and on spillover speculative selling pressure from the plunging corn and soybean markets.
“This week’s price action is a real sign that the party is over from the high prices due to the 2012 drought,” said Rich Feltes, director of research for trade house R.J. O’Brien.
Last year’s drought, the worst in the United States in over 50 years, slashed production and boosted corn and soy prices to record highs. Now the market is undergoing an abrupt correction.
Terry Reilly, senior commodity analyst for Futures International, said the falling U.S. cash soybean and soymeal markets and increased farmer selling of soybeans put extreme pressure on old-crop futures contracts.
But another reason for the decline was a surge in Brazilian soymeal exports, with July sales on track to reach 1.86 million tonnes.
“Our previous working estimate for Brazil soybean meal exports for July was 1.450 million tons,” Reilly said.
Chicago Board of Trade August soybeans closed down 37-1/4 cents per bushel at $13.55-1/4, August soymeal was down the daily $20-per-ton limit at $447.80 and September corn was down 12-1/4 cents at $4.96.
New-crop December corn was down 1-1/2 cents at $4.78-3/4, and September wheat was down 4 cents at $6.49-1/4 per bushel.
HUGE WEEKLY DECLINES
September corn and August soy are already down over 8 percent for the week while August soymeal is down 7 percent, the biggest weekly decline for the life of those contracts, with one day of trading remaining.
Soybean spot basis bids plunged across the U.S. Midwest on Thursday, with bids declining for the fourth straight day in tandem with a drop in futures that saw cash prices for the oilseed fall by more than $2 per bushel so far this week, cash grain dealers said.
Record-high cash bids for corn in the United States were starting to show signs of cracking on Thursday, but strong demand from ethanol plants was likely to prevent a wave of declines that were seen this week in the soybean market, analysts and grain merchants said.
“U.S. weather is excellent for corn and soybeans,” said Joyce Liu, an investment analyst at Phillip Futures in Singapore. “I think the weather will continue to dominate corn and soybean futures until the end of August.”
Below-average temperatures and occasional showers through the end of July will aid the pollinating U.S. corn crop and boost growth of the soybean crop, an agricultural meteorologist said on Thursday.
“The cool pattern will continue through the next two weeks, with the best chance for a brief warming trend in the south and southwest (crop belt) later next week,” said meteorologist Joel Widenor of Commodity Weather Group.
BUYERS BACKING AWAY
The increasing likelihood of bumper crops later this year has prompted soy processors and livestock producers to hold off on making purchases until cheaper new-crop supplies are available.
“U.S. demand is pretty weak as processors are waiting for new-crop supply,” Liu said.
Agribusiness company Bunge Ltd on Thursday said quarterly earnings were cut in half due to tight crop supplies, and it would adjust its investment approach to improve returns.
Bunge, one of the world’s largest agricultural trading houses, is anxiously awaiting the next U.S. soy and corn harvests this autumn to increase the volume of crops available for it to buy, sell, transport and process.
Corn and soybean prices soared to record highs last year after U.S. harvests were devastated by a historic drought, while grain crops in Argentina and the Black Sea region also suffered due to poor weather.
SOY AND MEAL LOADED WITH FUND LONGS
Chicago Board of Trade sources said over the past three days that commodity funds sold an estimated 31,000 contracts, or 155 million bushels of soybeans valued at roughly $2.356 billion based on Monday’s closing price of $15.20-1/4 for August.
At the same time, funds sold 11,000 soymeal contracts, or
1.7 million tons valued at roughly $853 million based on Monday’s close of $502.40 for August.
The tight stocks of soybeans and soymeal due to the drought-reduced production last season had led to huge buying of each commodity by commodity funds, leading to a large buildup of long positions in each futures market.
Hedge funds, or trading funds, were long about 157,000 and short 75,000 CBOT soy futures and options combined as of July 16 and were long nearly 74,000 and short about 38,000 soymeal futures and options combined, according to the Commodity Futures Trading Commission.
WHEAT MARKET TO STRUGGLE
“We expect the trajectory for global wheat prices to remain sideways to lower over coming months,” European-based bank Rabobank said in the report, noting significant production increases in the Black Sea region, Europe and Canada.
“Large increases in exportable wheat surpluses in the Black Sea region … are forecast to result in very aggressive pricing, which is likely to dominate world wheat trade over the coming months,” the report added.
November milling wheat in Paris closed down 2.00 euros per tonne, or 1.05 percent lower, and set a new contract low of 188.00 euros in earlier dealings.