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At mid-day, Chinese soybean news spurs CBOT 'reversal' day

Agriculture.com Staff 11/20/2007 @ 10:46am

Talk of a cut in the import duty for soybeans entering China led to a limit-down move in the soybean market there overnight, and it's causing a bullish stir in CBOT soybean futures today. Corn and wheat are following suit.

"A close over $10.90 per bushel is needed to negate this negative signal," says Jason Ward, market analyst with Northstar Commodity Investment Co. in Minneapolis. "I think a lot of traders are looking for a reason to bank profits on soybeans before the holiday, but this news out of China and the reversal sharply higher in the outside markets (crude up $2.00 per barrel, gold up $16.00 per ounce, Dow up 80 points and U.S. dollar retesting all-time lows at 43 points lower) have this soybean market trading 14 cents higher today with Jan. '08 at $10.84."

The current import duty on soybeans entering China is three percent, and the possible change would take it to one percent beginning in the first quarter of 2008, Ward adds. Altogether, with other duties on soybean oil and other derivative products, the duty currently totals around 16%.

Following along with this morning's CBOT soybean futures bump is corn, which as of mid-day was trading five cents per bushel higher at $3.83 for the Dec. '07 contract. "Today is option expiration in teh Dec. contract of corn and wheat, and I would expect a settlement on Dec. corn around an even strike price, so I would guess $3.80 per bushel or higher to exercise all the $3.80 options in the money," Ward says.

The wheat market has stayed in the bullish step with corn and soybeans this morning, Ward adds. Looking ahead, however, there's reason for some bullish weather pressures coming for the wheat trade.

"The wheat market has some problems of its own to deal with relating to the dry weather concerns in the southern Plains," Ward says. "There is rainfall forecast in the next 10 days for Texas and this rainfall is becoming critical before this winter wheat crop goes dormant. It is highly rated in the poor to very-poor category and rainfall is needed by the first week of December."

Talk of a cut in the import duty for soybeans entering China led to a limit-down move in the soybean market there overnight, and it's causing a bullish stir in CBOT soybean futures today. Corn and wheat are following suit.

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