Soy surges on weak dollar, South American concerns

Tuesday, 24 January 2012 00:08

CHICAGO: US soybean futures surged 2 percent on Monday on a declining dollar and concerns that rains in Argentina will not be ample enough to relieve crop stress after weeks of dry weather in the major South American grain and soy exporter.

Corn and wheat futures were up modestly but eased from their session highs in the absence of fresh news for bullish traders.

Soybean futures were on pace for their largest daily gain in two weeks at the Chicago Board of Trade amid disappointing weekend rains and a forecast for only "patchy" precipitation in Argentina, the world's biggest exporter of soy products.

"It looks like the much-anticipated rain event will wind up being a dud for most key growing areas there (in South America)," INTL FCStone analyst Matt Zeller said in a note to clients.

Some areas of Argentina received as much as 50 millimeters (2 inches) of rain over the weekend while others had only 2 millimeters, Martin Fraguio, executive director of Argentina's main corn industry chamber, Maizar, told Reuters.

CBOT soybeans for March delivery advanced more than 2 percent on the news, rising 29-1/2 cents to $12.16-1/2 per bushel, while CBOT March corn was up 6 cents at $6.17-1/2 and CBOT March wheat was up 8-1/4 cents at $6.18-3/4.

"A lot of the damage to (Argentine) corn has already been done and pretty well priced into the market. Soybeans are going into the critical stages of development and that's what has gathered the attention of the market today," said Shawn McCambridge, analyst at Jefferies Bache in Chicago.

Global wheat stocks are at the highest level in more than a decade and could help blunt the impact of lower corn production in Argentina. But "you can't substitute wheat for soybeans," McCambridge said.

The dollar fell against a basket of currencies, with the euro hitting a near three-week high against the greenback on optimism that Greece will cut a deal with its creditors. A weaker dollar makes commodities priced in the US currency more attractive to exporters.

STRONG US CASH MARKETS, EXPORTS SUPPORTIVE

Firm cash grains markets in the US Midwest also underpinned futures in Chicago, with the cash corn basis in central Illinois climbing to its highest point in four decades for this time of year, traders and analysts said.

US farmers, flush with record earnings of recent years, have delayed sales of corn and soybeans in the hope of selling at higher prices as supplies tighten ahead of the spring planting season.

Exporters have been clamoring for supplies to meet renewed demand for US supplies due to the drought in South America.

US weekly soybean exports surged to a three-month high, while corn sales hit a one-month peak, both topping trade expectations, according to government data last week. Wheat export sales also topped trade forecasts and were the largest in two months.

"Wheat and corn are continuing the positive momentum from last week, and the gains seem to be linked to stronger pace of US export sales," said Luke Mathews, commodities strategist at Commonwealth Bank of Australia.

The brisk export sales suggested the market was reacting to a sharp dip in prices after bearish supply estimates from the US government on Jan. 12.