Soybeans tumble hard on macro, weather worries
U.S. soybean futures tumbled Monday, as investors reduced risk amid macroeconomic worries and optimistic crop-weather forecasts.
The most-active November soybean contract briefly dropped to its 70-cent daily trading limit before trimming losses to settle down 64 cents, or 3.8%, at $16.22 1/4 a bushel.
Most asset classes saw broader-based weakness on lingering worries about the global economy, with investors fearful of the instability in the euro zone.
"The influence of outside markets set the stage for the dip in prices, with fear that forecast rains could signal a weather pattern change making bullish traders nervous," said Mike Zuzolo, president of advisory firm Global Commodity Analytics and Consulting in Lafayette, Ind.
Traders took a cautious approach in the face of the uncertain global economy, reducing risk after futures surged to record highs last week.
Soybeans were more susceptible to the risk-off environment as investment funds hold formidable long positions in the market after prices surged recently on threats of shrinking crop yields from a Midwest drought.
Weather forecasts provide hope for Midwest soybean crops with rains expected to move through parts of the crop belt.
"Anytime you have rain in the forecast, traders have to acknowledge the moisture could go a long way in stabilizing and improving soybean yields," said Jason Britt, president of brokerage Central States Commodities in Kansas City, Mo.
A rain event forecast to move across parts of the U.S. Midwest, providing beneficial soil moisture for crops in their key reproductive stage of development helped set the tone for the day. Rains are very important for developing soybean crops, particularly after recent heat dried out fields in prior weeks.
"A fairly significant disturbance from Canada will produce up to 1 1/2 inches of rain for crop areas north of U.S. Interstate 80 by Thursday," said Mike Palmerino, meteorologist with Telvent DTN Weather in Boston, Mass.
The rain won't be a drought breaker, but will provide relief from recent heat and dryness stress, Mr. Palmerino said. Midday weather models clearly suggest, that some of the driest areas of the Midwest, including Illinois and Indiana could receive some showers by early next week, Mr. Palmerino added.
"With rain in the forecast and outside markets down, it's not surprising to see prices slip, as soybeans have been on a parabolic run in the last few weeks, Mr. Britt added.
CBOT August soybeans settled down 59 cents or 3.4% at $16.98 1/2 a bushel. August soymeal finished down $20 its daily trading limit, or 3.7%, at $523 a short ton.
Separately, corn and wheat futures dipped in unison with soybeans, succumbing to widespread risk aversion, with traders taking profits off the table after the steady rise in prices in recent weeks.
CBOT September corn ended down 10 1/2 cents, or 1.3%, at $8.14, and December corn ended down 10 1/4 cents, or 1.3%, at $7.85 1/2.
CBOT September wheat dropped 30 1/2 cents, or 3.2%, to $9.12 3/4, September KCBT wheat closed 27 cents, or 2.9%, lower to $9.14, and MGEX September wheat settled down 26 cents, or 2.5%, at $10.05 1/2.
Write to Andrew Johnson Jr. at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
July 23, 2012 16:33 ET (20:33 GMT)
DJ US GRAIN AND SOY REVIEW: Soybeans Tumble, Macroeconomic Worry, Weather Forecasts->copyright