Soy near two-month top on poor US weather, China sales

CHICAGO: US soybean futures neared a two-month high on Monday on poor Midwest harvest conditions, coupled with reminders of strong domestic crushing demand and signs of US soy cargoes headed to China, analysts said.

Corn and wheat followed the firm trend.

As of 1:06 p.m. CDT (1806 GMT), Chicago Board of Trade November soybean futures were up 20-1/2 cents at $8.88 per bushel after reaching $8.89, the contract's highest since Aug. 21. CBOT December corn was up 3-3/4 cents at $3.77-1/2 a bushel and December soft red winter wheat was up 5 cents at $5.22-1/4 a bushel.

Soybeans led the rally on worries that wet and cold conditions in the Midwest that have slowed the harvest could also lead to quality problems with soybeans and corn.

Drier weather is expected in the second half of October, but heavy rains last week may have damaged some crops.

"We had reports of that toward the end of last week, and I think the rest of the world is waking up to it," said Don Roose, president of Iowa-based US Commodities. "It's funds getting out and adding risk premium to the market."

Ahead of the US Department of Agriculture's weekly crop progress report due later on Monday, analysts on average expected the government to show the harvest of both the US corn and soybean crops as 40 percent complete.

Additional support stemmed from the USDA's weekly export inspections report, which showed two US soybean cargoes earmarked for mainland China, the first since mid-September.

US soy sales to China, by far the world's largest soy importer, have stalled in recent months due to an ongoing trade dispute.

The inspections data suggest China is covering needs until the South American soy harvest begins in early 2019, said analyst Terry Reilly with Futures International in Chicago.

"If we see these numbers rise in the weekly inspections," Reilly said, "then we know China is in real need of beans, and they will pay up for it."

Domestically, the National Oilseed Processors Association said its members crushed 160.8 million bushels of soybeans in September, topping an average of trade expectations for 158.9 million.

Corn rose on short-covering and ideas that the US corn yield might be lower than the USDA's Oct. 11 forecast of 180.7 bushels per acre.

"Traders are still expecting the US corn yield to decline in November," Reilly said.

Commodity funds hold a net short position in CBOT corn, soybean and wheat futures, leaving all three markets vulnerable to bouts of short-covering.