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Soybeans ride S.A. weather higher

01/22/2013 @ 3:14pm

U.S. soybean futures rose 1.6% to a one-week high on Tuesday, buoyed by concerns that dry weather could hinder soy crops in South America.

Traders seized on forecasts that indicate a recent pattern of drier weather could continue to threaten crops in parts of Brazil and Argentina, the world's largest soybean producers after the U.S. Traders are particularly concerned about Argentina, where near-term forecasts project hotter and drier weather than for the affected areas in Brazil.

"There's not much rain on the horizon," said Mike Tannura, owner of private forecaster T-storm Weather LLC in Chicago. "You have lots of things in favor of creating yield problems in Argentina."




Many areas in central Argentina, the heart of the country's corn and soybean belt, have received only one to two inches of rain in the past month, compared to an average of around four inches, Mr. Tannura said.

Soybeans for March delivery settled up 22 1/2 cents at $14.51 3/4 a bushel at the Chicago Board of Trade.

The possibility of damage to South America's crops comes at a delicate time for the soybean market. Soybean buyers are counting on the continent's harvest, which will proceed over the next four months, to ease the strain of tight global supplies. U.S. soybean futures soared to a nominal closing record of $17.71 a bushel last September as a severe drought battered the U.S. crop just months after farmers in Brazil and Argentina grappled with drought.

Soybean prices have fallen 18% since then, partly because late-season rains helped the U.S. crop recover somewhat. But futures remain at historically high levels, and a repeat of last year's production losses in South America could send prices surging again.

South American crops do not yet face a serious threat, but grain traders are highly sensitive to changes in weather forecasts, and just the potential for damage to crops in major producing areas is often enough to boost prices.

Until the past two weeks, weather conditions had generally been favorable for soy crops in Brazil and Argentina. Some of Argentina's areas now drawing concern over dryness had seen above-average rain levels earlier in the season. If rain picks up again in early February, crops could recover quickly from the current dryness, meteorologists said.

Michael Cordonnier, president of Soybean and Corn Advisor Inc., a Chicago-based crop consultancy, said he would have raised his forecast for the Brazilian soy harvest if it weren't for drier weather emerging in the country's south. He forecasts Brazilian farmers will harvest 81 million metric tons of soybeans this year, or 2% less than predicted by the U.S. Department of Agriculture.

Mr. Cordonnier's forecast for Argentina's soy production is 53 million tons, also 2% below the USDA's forecast.

"Somebody flipped a switch. The rain just stopped in Argentina," he said.

Corn futures rose 0.1% on Tuesday, also on the threat of dry weather damaging South American crops. But corn rose by less than soybeans because Brazil and Argentina account for a lower proportion of world corn output.

March corn settled up 1 cent at $7.28 1/2 a bushel.

Wheat futures fell on the view that a rally over the last week and a half may have been overdone. Traders are also concerned about weak export demand for U.S. wheat.

CBOT March wheat settled down 12 cents or 1.5% at $7.79 1/4 a bushel. Kansas City Board of Trade March wheat fell 13 cents or 1.5% to $8.30 3/4 a bushel. MGEX March wheat fell 9 3/4 cents or 1.1% to $8.64 1/4 a bushel.


Write to Owen Fletcher at owen.fletcher@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
January 22, 2013 15:49 ET (20:49 GMT)
DJ UPDATE: US Soybeans Settle Higher on Dry South America Weather->copyright


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