U.S. grains: Soy futures ease on rains in South American forecasts

CBOT January 2020 soybeans with 20-, 50- and 100-day moving averages. (Barchart)

Reuters — U.S. soybean futures edged lower on Thursday, retreating from a five-week high touched earlier this week as traders expected rains to benefit rival suppliers in South America.

Favourable crop weather could boost production in Argentina and Brazil, increasing global supplies and competition for export sales to buyers like China. Rains will ease dry conditions in southern Argentina and also bring relief to drier areas of Brazil, Commodity Weather Group said.

“It’s really beneficial for Argentina, the best rains they’ve had for several weeks,” said Brian Hoops, president of U.S. broker Midwest Market Solutions.

Argentina is the world’s No. 3 soybean and corn exporter, as well as its top supplier of soymeal livestock feed. Soy plantings advanced 8.9 percentage points over the past week, reaching 70.2 per cent of expected sowing area thanks to rains that relieved excessively dry conditions, according to the Buenos Aires Grains Exchange.

In Brazil, the world’s biggest soybean exporter, farmers are expected to harvest a record crop.

For more than a year, China, the world’s biggest soy importer, has increasingly turned to Brazil rather than the United States for soybeans due to the trade war between Washington and Beijing.

A long-awaited U.S.-China ‘Phase One’ trade agreement announced on Dec. 13 buoyed grain markets because it included a commitment by Beijing to expand purchases of U.S. farm products.

U.S. Treasury Secretary Steven Mnuchin said the United States and China would sign the pact at the beginning of January.

But grain traders remain wary about projections from Washington that agricultural deals will reach $40 billion to $50 billion within two years, compared with $24 billion before the trade dispute (all figures US$).

“The reality is we don’t know a lot about the Chinese purchases,” Hoops said.

The most active soybean contract on the Chicago Board of Trade slid four cents at $9.24-1/2 a bushel. The market on Tuesday climbed to its highest since Nov. 8 at $9.31 before closing marginally lower on Wednesday.

Corn ended 1/2 cent lower at $3.86-1/2 a bushel, down from a six-week high of $3.90-1/2 touched on Tuesday. Wheat stumbled three cents to $5.45-1/4 a bushel at the CBOT. The market also ended lower on Wednesday, when it retreated from a 5-1/2 month high struck on Tuesday.

The U.S. Department of Agriculture said export sales of wheat totaled 868,600 tonnes last week, topping analyst forecasts that ranged from 200,000 tonnes to 600,000 tonnes.

Reporting for Reuters by Tom Polansek in Chicago; additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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