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Weather still a concern for South America soy crop

Agriculture.com Staff 02/15/2006 @ 12:04pm

Though fund investing in the last month captured most of the attention of the soybean futures market on the Chicago Board of Trade, fundamental factors such as South America's crop weather is expected to remain popular, analysts said on Wednesday.

For the most part this year, Brazil's soybean weather has been favorable with dry spots in the south. Some insect and Asian soybean rust pressure has reduced yields, but to what degree is still largely unknown. Though with spotty rain events, Argentina's soybean crop has suffered dry periods throughout its growing season. Because of drought, USDA, in its February supply and demand report, lowered Paraguay's soybean estimate from 5.0 million metric tons to 3.0 million.

Anne Frick, Prudential Securities market analyst, said the U.S. soybean market up until now has paid less attention to the South American crop this year compared to last year, because of less eventful news, Frick said.

"Last year there was a prolonged drought in southern Brazil. This year, we've had periods of dry weather that have alternated between southern Brazil and Argentina. And, just when it looks like the weather is going to cause a problem, the rains come in and the dryness shifts to the other area," Frick said.

Market psychology is also being influenced by the U.S. experience from last year, where a drought hit parts of Illinois, the second largest soybean producing state, yet the U.S. ended up with record high yields.

Don Roose, U.S. Commodities, was quick to point out that CBOT traders will always keep one eye on the South American situation. "In northern Brazil, soybean harvest has begun with excellent yields being reported. In central Brazil, soybeans are still in the pod-filling stage, and soybeans are still flowering and pod-filling in southern Brazil," Roose said. "I think the market is starting to focus more of its attention to the South American crop."

Weather can still impact the outcome of the soybean crop in southern Brazil and Argentina, Frick said. "There is plenty of time for the weather to influence particularly Argentina's crop where their season lasts a month longer than most of Brazil's crop," Frick said.

When asked what has to happen for the soybean market to react in a bullish way, Roose said South America rains would have to shut off and temperatures would have to stay in the high 90's. "It would have to do that for an extended period," Roose said.

Though fund investing in the last month captured most of the attention of the soybean futures market on the Chicago Board of Trade, fundamental factors such as South America's crop weather is expected to remain popular, analysts said on Wednesday.

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