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CBOT market watchers eye South America soy crop

Because South America weather -- rainy or dry -- impacts U.S. soybean prices on the Chicago Board of Trade (CBOT), market analysts say this time of the year can spark or kill weather market rallies.

Bryan Doherty, a Stewart-Peterson market analyst, said last Friday that soybean prices found support from dry weather concerns in parts of Argentina and Southern Brazil.

"However, it is difficult to suggest any substantial yield loss or, for that matter, any direct yield loss at all. Therefore, prices are likely trading anywhere from 50 cents to $1.25 higher than one might think, given significant world and U.S. carryout," Doherty said.

Joe Victor, a market analyst with Allendale, Inc., agreed that CBOT soybean futures traders see favorable weather in most of Brazil, but that Argentina soybeans need water.

"Because of drier conditions in the key soybean-growing region of Santa Fe, and in bordering regions of Cordoba and Buenos Aires, the market is trying to rally," Victor said.

Victor added, "If there is a key word right now for Argentina it's timely rains. The rains forecasted for next week are scattered amounts with only 20%-30% coverage. What we see into the 30-day forecast is some timely rains for the crop."

Because Argentina has a longer growing season, its ability to capture timely rains is much greater than Brazil.

Overall, market watchers still see Brazil capable of producing a 58.0 million metric ton soybean crop, above 51.0 million metric tons in 2004-05. This year, Argentina is expected to produce 40 million metric tons of soybeans.

In 2004-05, the worst drought in nearly 50 years shortened the southern Brazil soybean crop.

"We don't see a weather problem in South America yet. I think that is what the market traders are keeping in the back of their minds," Victor said.

Because South America weather -- rainy or dry -- impacts U.S. soybean prices on the Chicago Board of Trade (CBOT), market analysts say this time of the year can spark or kill weather market rallies.

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