U.S. grains: Soy sinks to six-week low on S. America outlook

U.S. soybeans fell to a six-week low on Thursday on technical selling, prospects for large South American crops and weakness in soymeal values, traders said.

Corn and wheat also fell at the Chicago Board of Trade, with wheat setting life-of-contract lows.

At the CBOT, the most-active March soybean contract settled down 22-1/2 cents at $12.70 per bushel, falling below chart support at its 200-day moving average at $12.74-1/2 (all figures US$). The contract dipped to $12.62-1/2, its lowest since Nov. 20.

March corn ended down 1-1/2 cents at $4.20-1/2 a bushel, setting back after early gains, and March wheat finished down 8-1/4 cents at $5.97 a bushel.

Soybeans declined as rains fell in parts of Argentina, where soy and corn crops have been in need of moisture. In Brazil, the harvest of a likely record-large soybean crop is underway in a few areas.

“Argentina overnight and early this morning had some very timely showers, and that is the thing pressing the soybean market. They are taking the weather premium out,” said Don Roose, president of U.S. Commodities.

Argentina will need more rain in the coming weeks, said Joel Widenor, a meteorologist with the Commodity Weather Group.

“There was at least three-quarters of the Argentine corn/soy (region) that picked up mostly 0.5 to 1.5 inch (1.3 to 3.8 cm) in the past week. This was enough to limit concern to less than one-quarter of the corn for the near-term, but more rain is needed at mid-month,” Widenor told the Reuters Global Ags Forum.

“Most of the concern this month will be for corn pollination. Soy will not reach key stages until February,” Widenor said.

Also, commodity funds are net short in corn and net long in soybeans, and Roose said they appeared to be unwinding long corn/short soybean spread positions as the new year begins.

CBOT corn fell 40 per cent in 2013, the biggest loser among major commodities, while soybeans fell 7.5 per cent on the year.

Soymeal futures fell the most by percentage on Thursday in the CBOT soy complex on worries of a slowdown in demand, given a sharp fall in prices for dried distillers’ grains (DDGs), a competing feed ingredient made from corn.

U.S. cash prices for DDGs have tumbled in the last two weeks since China rejected some cargoes of U.S. DDGs due to an unapproved genetically modified strain of corn.

Traders are concerned that a drop in Chinese demand for DDGs will cause a backlog of U.S. supplies, further depressing prices and threatening to replace soymeal in feed rations.

“I think the trade is surprised at how hard DDG prices have fallen and how delicious DDGs look compared to soymeal,” said Rich Nelson, analyst with Allendale Inc.

CBOT wheat settles below $6

CBOT wheat fell to contract lows and settled below $6 a bushel, with the front month falling to a 19-month bottom, on ample global wheat supplies and a lack of export demand.

“When are we going to find buyers? That’s the main question,” Nelson said.

Fresh demand followed the sell-off. After the lower close, Egypt’s main government buyer said it was seeking wheat for shipment in late January and early February.

CBOT wheat lost 22 per cent in 2013, its biggest annual loss in five years.

A cold snap is forecast for the central United States early next week, with temperatures dropping below 0 F (-18 C), but the threat of winterkill should be limited to hard red winter crops in parts of northern Kansas and eastern Nebraska, forecasters said.

The core of the cold on Monday and Tuesday will be in the Midwest, but a thick blanket of insulating snow should protect the dormant soft red winter wheat crop there.

– Julie Ingwersen is a Reuters correspondent covering ag commodity markets from Chicago.