US soy drops for 3rd day on euro zone concerns

US soy drops for 3rd day on euro zone concerns

FMCG SUPPLIER NEWS

Business Day - May 10th 2012, 09:42

US soybeans fell for a third consecutive session on Wednesday, while corn and wheat dropped amid wider weakness in financial markets, a stronger dollar and risk-aversion ahead of a key US government crop report on Thursday.
 

Escalating fears about the euro-zone’s debt crisis pressured the euro and European equities while crude oil and metals were also weaker.

Chicago Board Of Trade July soybeans fell 0,6% to $14,28-1/2 a bushel by 1108 GMT after profit-taking and technical selling caused a drop of almost 2% in the previous session.

Chicago July corn fell 0,4% to $6,20-1/2 a bushel, after climbing 0,5% on Tuesday, while Chicago July wheat fell 0,6% to $6,11 a bushel.

"I think wheat, corn and soybeans are being weakened by a combination of a stronger dollar, lower crude oil and falling equities today," said Rabobank analyst Erin FitzPatrick. "Risk is also being taken off the table in front of the US Department of Agriculture’s world agricultural supply and demand estimates on Thursday."

"There is a very wide range of estimates about what could come out of the especially important USDA report tomorrow and so risk-aversion today."

The USDA on Thursday will update its supply-demand estimates for the 2011/12 (Sept/Aug) season for corn, soybeans and wheat, while offering its first look at ending stocks for corn and soybeans in 2012/13.

"The USDA is reporting on the US and world production for 2012 tomorrow and traders will look to square some positions ahead of this," INT FCStone Europe said in a note.

Corn stocks are expected to be cut when the USDA announces its 2011/12 marketing year corn ending stocks estimate, already at a 16-year low, in a monthly crop report on Thursday.

While near-term stocks are widely expected to fall, the government is expected to show 2012/13 stocks would soar nearly 130% to a six-year high as farmers plant the largest corn area in 75 years.

Soybeans lost ground on Wednesday despite continued cuts in production forecasts in South America and strong Chinese demand.

The USDA confirmed the sale of 225,000 tonnes of soybeans to China on Tuesday.

Hamburg-based analyst Oil World on Tuesday cut its outlook for Argentina’s soy crop by 1,5-million tonnes and warned that another downgrade of Brazil’s crop was likely.

"We have continued to see strong buying by China, especially of soybeans and also of corn," Rabobank’s FitzPatrick said. "We did not see huge soybean exports from Brazil in April and there have been some downgrades to soybean crop forecasts in Argentina.

"So the underlying fundamentals have not shifted as much as the price movements we have seen over the past week would tend to imply."

Soybean exports could be further hit if a prolonged period of industrial action by members of the San Lorenzo branch of the CGT labour federation continues, which could slow shipments of soybeans, soymeal and oil from Argentina.

Workers at leading grains export ports in Argentina will go on strike on Thursday and blockade soy-crushing plants unless their minimum wage is hiked to reflect brisk inflation, a union spokesman said on Tuesday.

REUTERS