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Agriculture Markets Resurgent as Soybeans Top $10, Corn Hits $4

Soybeans climbed higher than $10 a bushel for the first time since July, and corn topped $4 a bushel as unfavorable weather in South America and an improving demand outlook for U.S. supplies bolstered agriculture markets.

Dryness in Brazil is causing conditions to deteriorate for the country’s second corn crop, and the country suspended import tariffs for the next six months, signaling the grower may need to ship grain in. Flooding in Argentina, the world’s third-largest soybean grower, is expected to cut output of that crop by about 5 percent, according to Oil World. With South American plants under threat, more buyers may turn to U.S. growers for supplies, especially as declines for the dollar against the real make the shipments relatively cheaper.

The gains for crop prices show that futures may be bottoming after reaching multi-year lows earlier this month. Even with most grains still plagued by supply surpluses, optimism has been growing in the markets over the past several weeks amid signs of stabilizing demand in China and unexpected weather concerns for South American harvests. The likelihood of a La Nina pattern this year also brings the threat of drought to U.S. growing areas later this season.

 

“Crop estimates are trending lower both in Brazil for corn and Argentina for soybeans at a time when we largely thought those crops were made and soon to be put away,” Brian Roach, president of Roach Ag Marketing in Boca Raton, Florida, said in a telephone interview.

Prices Jump

Soybean futures for July delivery climbed 2.4 percent to settle at $10.19 a bushel Wednesday on the Chicago Board of Trade. Corn futures for the same delivery month rose 2.6 percent to $3.9975, after reaching the highest since August. Prices of both crops are up more than 11 percent this month. Wheat futures rose above $5 a bushel, touching the highest since mid-November.

Soybean crushing margins jumped fourfold in China overnight, and futures volume surged on the Dalian Commodity Exchange, boosting demand for imported soybeans, said Charlie Sernatinger, head of grain futures for ED&F Man Capital Markets LLC in Chicago.

Market participation in Chicago also expanded as prices rallied. The expiration of May soybean options on Friday triggered increased trading, and futures volumes surged to an estimated 795,002, topping yesterday’s record 615,075. Open interest is also at an all-time high.

 

“Chinese crushing margins popped overnight on a strong rally in soybean meal and they were in buying more cargoes for forward shipment,” Sernatinger said. “It’s still raining in Argentina, giving farmers few opportunities to harvest, but it will be at least another week before the full extent of damage will be known.”

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