Grain futures tumble
November 14, 2012
Grain futures tumbled in a wave of technical selling on Monday, with soyabeans sinking to a 4-1/2 month low that nearly erased gains from this summer’s devastating drought. Prices were already under pressure after the US Department of Agriculture on Friday raised its estimate of US soyabean production more than expected and increased its forecast for global inventories.
Monday’s technical selling pushed soyabeans down 21 percent from their all-time high set in early September. When a market drops more than 20 percent over at least two months, it is considered to have gone beyond a correction and become a technical bear market. The technical selloff spread to wheat and corn from the soyabean market, where it began, said Jerry Gidel, chief feed grain analyst for Rice Dairy. “Right now, it’s ‘get me out’ time,” he said. Most-actively traded January soyabeans fell 3.2 percent to $14.05 a bushel on the Chicago Board of Trade. Front-month November soyabeans lost 2.8 percent to $14.11 a bushel. December CBOT wheat fell 3.2 percent to $8.57-3/4 a bushel, while December CBOT corn dropped 2.8 percent to $7.18 a bushel.
Soyabean futures began a rally linked to the worst US drought in more than 50 years on June 15 at $13.86 per bushel and hit a record high of $17.94-3/4 on September 4 as fears of dwindling supplies peaked. But the USDA, in a monthly supply-demand report on Friday, told traders that crop losses from the drought were not as severe as previously thought. The department pegged US soyabean production at 2.971 billion bushels, up from its October estimate of 2.86 billion and the 2.892 billion predicted by analysts. “The soya complex is still reeling from the bearish US yield implications and increase in world ending stocks,” said Brian Hoops, president of Midwest Market Solutions.
Prices are likely to come under even more pressure moving forward, with expectations for near-record supplies from South America by March, analysts said. Beneficial rains moved into the southern half of Brazil’s top soya-producing state of Mato Grosso, boosting prospects for soyabean planting and germination, according to local forecaster Somar. Following the USDA report, Goldman Sachs cut its three-month price forecast for soyabeans to $15.50 from $16.50 and its six-month outlook to $17.25 from $18.75.
Speculators have exited the soya market recently amid improving optimism about inventories. Large speculators cut their net long position in US soyabean futures by 4.7 percent to an eight-month low as of Tuesday, unwinding bullish bets due to increasing supply forecasts, regulatory data showed on Friday. “Risks of critically tight soyabean inventories continue to fade quickly,” Goldman said in a note. On Monday, funds sold an estimated 8,000 soyabean contracts, 18,000 corn and 6,000 wheat contracts, CBOT floor sources said. Goldman cut its three-month forecast for corn prices to $8.25 a bushel from $9 and its wheat price forecast to $9.50 from $10.25.