U.S. grains: Soy up on prospects for Chinese demand

U.S. dollar strength drags on wheat, corn

CBOT March 2020 soybeans with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — U.S. soybean futures rose on Thursday, rallying from early declines on short-covering and prospects for China to step up purchases of U.S. supplies as the U.S.-China Phase One deal goes into effect in days, traders said.

But wheat and corn futures fell, pressured by a stronger U.S. dollar, worries about economic fallout from the coronavirus outbreak and outlooks for large South American harvests.

The March soybean contract on the Chicago Board of Trade settled up 3-3/4 cents at $8.96-1/4 per bushel to post its ninth consecutive higher close (all figures US$).

Soybeans turned higher as traders considered that the U.S.-China Phase One trade agreement was due to go into effect 30 days after its Jan. 15 signing, potentially spurring export demand for U.S. agricultural products.

Commodity funds hold a net short position in CBOT soybean futures, leaving the market vulnerable to short-covering rallies, and U.S. markets will be closed on Monday for the Presidents Day holiday.

“Traders are trying to position for the potential opening of Chinese markets next week,” said Dan Basse, president of Chicago-based AgResource Co. “If China all of a sudden comes out with duty-free export licences, or drops their tariffs, who wants to be short beans?”

Soybean futures drew additional support from a strong domestic soy crushing pace coupled with a lack of producer soybean sales.

“(Soybean) meal demand is very strong, both on the export and domestic use categories,” said Terry Reilly, senior analyst with Futures International in Chicago.

Some traders cautioned that China has been an aggressive buyer of Brazilian soybeans in recent days, taking advantage of a plunge in the value of Brazil’s currency.

CBOT March wheat ended down 3-1/4 cents at $5.44-1/4 per bushel. March corn settled down 3-1/2 cents at $3.79-1/2 a bushel, staying inside Wednesday’s trading range.

Wheat and corn took cues from declines in world equity markets, which were on the defensive as a sharp rise in the death toll from the coronavirus in China stoked concern about its impact.

Corn was also pressured by expectations for large South American harvests, given generally favourable crop weather.

Argentina’s Rosario grains exchange on Wednesday raised its forecast of the country’s corn crop to 50 million tonnes, from 49 million previously.

The Buenos Aires Grains Exchange pegged the crop at 49 million tonnes, in its first corn crop estimate of the season.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago; additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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