US Soybean Futures Suffer Record Fall

on May 15, 2012

Soybeans’ continual rise for the last six weeks has finally come to an end. Domestic and international economic troubles had a significant impact on the market, influencing investors’ disposition to sell, causing a 3.4% drop and a record low for the last six weeks. Some, such as Bill Nelson, analyst with the Doane Advisory Service in St. Louis,saw it coming.

“Soy futures were vulnerable to a selloff, after going up for so long and so far without correcting,” Mr. Nelson said.
Prices have been on the rise for quite a while, as drought reduced crop production in South America and the persistently demanding Chinese market, have allowed hedge funds to establish huge bets since December. But J.P. Morgan’s reported losses changed that and the market lost strong positions gained on Thursday, May 9, after a projected tightening of US soybeans supply through August 2013. Mike Zuzolo, president of Global Commodity Analytics and an analyst at Lafayette, Ind. commented that investors felt fearful of J.P Morgan compensating for their losses in other markets by taking profits in soybean and grain commodities.

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The fact that the planting weather in the US Midwest was generally good, will also keep the prices low, since soy seedlings will move at a good pace.
!m[](/uploads/story/69/thumbs/Pic1_inline.png)China was another factor that was accounted for in the fall of US soybeans. Soybeans are extremely China-sensitive, with the Asian country being the largest importer of soybeans on a global scale. Recent Chinese industrial data showed some indications of China’s economy slowing, when it turned lower than expected. Naturally, it scared traders off, solidifying their intentions to sell.

It appears that bad economic news coming from all sides has managed to shake a stable commodity market, which, as Mr. Zuzolo reminds, reached nearly a four year high just a week before the fall. Zizolo also said that investors couldn’t find a good reason to buy, digesting Thursday’s government estimates on supply and demand.
Other markets also felt the negative effect of the uncertain economic environment, as wheat and corn futures saw price drops, which were caused by broader based investors risk-off selling. And the fall of corn futures was additionally aided by larger supply estimates from government forecasters. As a result CBOT July corn closed at $5.81 a bushel, down 6.5 cents and December corn at $5.05 ¼, down 2 cents. Still, wheat managed to move up on some markets, as KCBT July wheat rose 7 1/2 cents to $6.10.


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