U.S. soybean and soybean meal futures plunged by their daily trading limits on Wednesday as cash bids for the oilseed collapsed across the Midwest and buyers retreated from the markets.
Farmers helped fuel the slide by selling some of their scarce old-crop soybeans to take advantage of nearby prices that are higher than those for the next crop.
A recent rally in futures prices and favorable crop weather encouraged farmers to sell, traders said. However, immediate demand for the oilseed has declined as U.S. soy processors and livestock producers are holding off on purchases until cheaper new-crop soybeans are harvested, they said. Processors and feeders hope a massive harvest this autumn will replenish soy inventories that are expected to fall to a nine-year low by Aug. 31. Nearby corn futures also tumbled on waning demand for pricey old-crop supplies.
“With these inversions in the market, nobody wants to buy it really badly,” Jim Gerlach, president of A/C Trading, said about old-crop corn and soybeans. “Why buy something today when it goes on sale tomorrow?”
Chicago Board of Trade August soybeans fell 4.8 per cent, or the exchange-imposed 70-cent daily limit, to $13.92-1/2 a bushel. The contract has lost 8.8 per cent since hitting a 10-month high on Tuesday on concerns about tight supplies. November soybeans, which represent the next harvest, lost 0.3 per cent to $12.56-3/4. August soymeal tumbled 4.1 per cent, or the daily limit of $20, to $467.80 per short tonne. The contract has pulled back 10.2 per cent from a contract high reached on Tuesday.
September soymeal temporarily fell the $20 limit and ended down $19.90, or 4.5 per cent, at $417.70. “We’ve got farmer selling that is pressing the market, along with the fact that the end user doesn’t want to get caught with too abundant supply of old crop,” said Don Roose, president of U.S. Commodities. “It’s all a cash-led type of market.”
The outlook for the U.S. soy and corn harvests is favourable, with cooler temperatures and light rain over the next week to 10 days expected to boost the crops, according to World Weather Inc. The beneficial conditions are arriving just as corn is pollinating, the most important period of development for determining the size of the harvest.
September corn shed 2.8 per cent to $5.08-1/4 a bushel, while new-crop December corn slipped 1.1 per cent to $4.80-1/4 a bushel.
“As the forecast continues to show good conditions for pollination, users are more willing to hold off nearby purchases and wait,” said Sterling Smith, futures specialist for Citi.
Losses in corn weighed on CBOT wheat, with the most-actively traded September wheat contract ending near unchanged at $6.53-1/4 a bushel, traders said.
Demand is uncertain amid stiff competition for business from exporters in the Black Sea region. Egypt, the world’s top wheat importer, bought 240,000 tonnes of Russian, Romanian and Ukrainian wheat in a tender.
Iraq issued a tender to buy at least 50,000 tonnes of wheat with origins from the United States, Canada or Australia, the ministry said. Earlier this week, traders said Iraq bought 50,000 tonnes of Australian wheat for milling purposes and made the purchase for well over the lowest offer of lower-quality Russian wheat.