Pro Farmer: After the Bell Soybean Recap
Soybean futures enjoyed strong "value" buying interest today, to pull the market 40-plus cents higher through the January 2013 contract. Most farther deferred contracts saw gains ranging from the 20s to 40s. Soyoil and soymeal enjoyed strong spillover support. After two days of sharp selloffs, improved outside markets and ideas the overbought condition of the market had been corrected allowed soybean traders to shift their attention back to the state of the crop today.
Soybean Complex Market Recap
August Soybeans finished up 44 3/4 at 1694, 7 3/4 off the high and 76 up from the low. November Soybeans closed up 45 3/4 at 1615 1/4. This was 79 1/4 up from the low and 8 3/4 off the high. August Soymeal closed up 20 at 529.8. This was 32.2 up from the low and equal to the high. August Soybean Oil finished up 0.66 at 52.24, 0.39 off the high and 0.88 up from the low. August and November soybeans traded sharply higher into the close but fell off session highs. Traders and end users sought coverage on renewed fears that the recent drought and future weather conditions will diminish soybean yield further. August soybean meal is up $18 while soybean oil is up 61. The warmest temperatures in the Midwest will be seen today and the 6-10 day weather maps continue to keep above normal temperatures in the central and western Midwest. The western Corn Belt will see a break in temperatures this weekend and light rainfall is expected but above normal temperatures is expected to return next week. The delta is also expected to see restricted rainfall, especially in the north where topsoil moisture conditions are already short. Soybeans retraced nearly all of yesterday's move lower which added to the positive tone. Outside markets were positive today as optimism grows that central banks will enact new monetary policies to fight global deflation.
Are soybean spreads doing their job?
(Gavin Maguire is a Reuters market analyst. The views expressed are his own.)
CHICAGO, July 25 (Reuters) - Soybean prices for immediate delivery recently scaled all-time highs on fears of supply depletion after hostile growing conditions slashed U.S. production potential straight after South American growers suffered output setbacks of their own.
But usage rates are as much governed by price spreads as they are by outright price levels, and the recent sharp widening in 2012 to 2013 soybean spreads suggests end users have a strengthening incentive to postpone purchases for as long as possible even after the recent steep pullback in nearby prices.
VEGOILS-Palm oil rebounds; Europe worries cap gains
SINGAPORE, July 25 (Reuters) - Malaysian crude palm oil rebounded on bargain hunting after prices hit a five-week low the previous day, with gains were modest as worries remained that the euro zone debt crisis could hurt demand.
"The market recovered today as it was a little bit oversold. Exports were down 14 percent but that has already been factored in considering the market dropped close to 200 ringgit in the last few days," said a trader with a foreign commodities brokerage in Malaysia.
Indonesia to scrap soybeans import duty to ease high prices
JAKARTA, July 25 (Reuters) - Indonesia will scrap its 5 percent import duty on soybeans from August until the end of the year in a bid temper global prices which have hit record highs, an official at the industry ministry said on Wednesday.
U.S. soybean futures have risen by as much as 28 percent in the last month as the worst drought in 56 years in the U.S. Midwest threatens harvests. Supplies of the oilseed have also been affected by a drought in Brazil and Argentina, which damaged crops there.
Mr. Titanic Mistry Predicts Sinking Palm-Oil Prices: Commodities (Source:Bloomberg)
Dorab Mistry compared the palm-oil market in 1998 to the Titanic and correctly predicted a slump from then-record prices the next year. He’s now forecasting another retreat as weakening demand outweighs a decline in Malaysian production. Malaysia, the second-largest grower after Indonesia, will reap less than 18.6 million metric tons, at least 2.1 percent below the government’s 19-million-ton forecast, according to Mistry, the director of Godrej International Ltd. who has traded vegetable oils for more than three decades. Futures may decline 8.5 percent to 2,700 ringgit ($851) a ton by the end of the year, the lowest since October 2010, unless the U.S. does more to stimulate growth and boost demand, he said.
“Production has actually underperformed, even worse than I expected,” as Malaysia’s palms enter a less-productive point in their cycle after a bumper crop last year, the 59-year-old said. Demand is “just not there,” he said in a July 5 interview at new offices in Singapore that will become a trading hub for Godrej (GDSP) within five years. Palm, the most-consumed vegetable oil, already tumbled 19 percent from a 13-month high in April on prospects for record global production. Prices for the commodity used in everything from Nestle SA’s Maggi instant noodles and Unilever soaps to candy bars and biofuels, more than doubled in the past decade as producers failed to keep up with consumption. There is now mounting concern about demand as European economies sink back into recession and growth slows from China to Mexico.
Financial Crisis
The slump since April left futures traded on the Malaysia Derivatives Exchange 7.1 percent lower for the year at 2,951 ringgit. Prices may drop as low as 2,200 ringgit if there is a repeat of the 2008 financial crisis, Mistry said in June. The Standard & Poor’s GSCI gauge of 24 commodities fell 1.7 percent since the start of the year and the MSCI All-Country World Index of equities rose 1.3 percent. Treasuries returned 3.2 percent, a Bank of America Corp. index shows. Global palm consumption almost doubled in the past decade to 51.7 million tons, or about 33 percent of total demand for cooking oils, U.S. Department of Agriculture data show. At this year’s average of 3,218 ringgit, total supply is valued at about $54 billion. That compares with about $2.5 billion of outstanding contracts on the bourse in Kuala Lumpur and $10.1 billion of open interest in soybean-oil futures traded on the Chicago Board of Trade, according to data compiled by Bloomberg.
Declining Output
Mistry became known as Mr. Titanic after he compared world vegetable-oil prices to the ill-fated liner and he says his speeches at conferences in Kuala Lumpur over the next five years were preceded by Celine Dion’s theme song from the 1997 movie. He predicted in 1998 that the country’s palm production would decline on reduced yields caused by El Nino, a weather pattern that can parch parts of Asia. Output dropped 8.3 percent to 8.32 million tons, the first decline in four years, Palm Oil Board data show. Prices climbed to a then-record 2,562 ringgit in May that year, before plunging 74 percent by February 2001. The Indian-born trader, now based in London, has also got it wrong. He said in 2011 that palm would advance to 4,000 ringgit by June this year because of declining output in Indonesia and Malaysia. Prices peaked at 3,628 ringgit in April and the subsequent slump prompted Mistry to reverse his predictions and become bearish.
“He is normally on the extreme side on either up or down,” said Ben Santoso, a Singapore-based analyst at DBS Vickers, the brokerage unit of DBS Group Holdings Ltd., Southeast Asia’s biggest bank, who has attended the annual palm oil conference in Malaysia since 2001. “Nevertheless, we have to take consideration of what he said, the reasoning that he put out and see whether we’ve missed something.”
Margarine Use
While Mistry says his forecasts have a 70 percent success rate, he discounts those other analysts might consider accurate. He said in February 2008 that prices would reach 4,500 ringgit. In the four days after his speech, futures jumped 16 percent to 4,486 ringgit before retreating to a three-year low of 1,331 ringgit in October. He says that was “a big failure” because he had predicted a gradual advance over the year. After the crash, his best trade was buying palm stearin, derived from oil and used for products such as margarine. He said prices would rally because the U.S. would intervene to halt the rout. The Federal Reserve bought $2.3 trillion of debt in two rounds of so-called quantitative easing from December 2008 to June 2011. Palm futures more than doubled as the Standard & Poor’s GSCI gauge of 24 commodities rose about 90 percent.
Kalimantan Plantations
The Singapore office on the 24th floor of a 50-storey skyscraper will be the regional trading hub for Godrej International Trading and Investments Pte, a unit created in 2010. The company, which Mistry plans to visit once a month, will also oversee about 20,000 hectares (49,400 acres) of land owned with local partners in Indonesia’s Kalimantan, 20 percent of which is already planted. Godrej is investing in plantations to reduce its reliance on suppliers. The group uses vegetable oils for products including its Cinthol soap, sold in India since 1918, and to supply its Godrej Industries Ltd. unit, which makes chemicals. The Godrej Group based in Mumbai, which started in 1897 as a lock manufacturer, is led by Indian billionaire Adi Godrej.
Mistry was born in the western Indian state of Gujarat in 1953, moving with his family to Mumbai three years later. He attended Bombay University and later qualified as an accountant. Since moving to the U.K. with Godrej in 1977, he has been part of the 5,000-strong community of Zoroastrians, who follow an ancient monotheistic religion founded in Persia.
Zoroastrian Role
As a past president of the Zoroastrian community in Europe, Mistry counts the mother of Freddie Mercury as one of his friends, although he never met the singer of rock band Queen, who died in 1991. He was a guest at Queen Elizabeth II’s Golden Jubilee celebration in Westminster Abbey in 2002. As a self-described “one-man research team,” Mistry tracks weather patterns as well as supply and demand. His sources include the plantation industry and data from the USDA and Oil World, a Hamburg-based research company. The married father of three speaks at conferences about five times a year. “Most people do realize that it’s a tough job and it’s brave of someone to openly speak about prices,” Mistry said. “They also know it’s a market: you can’t be right 100 percent of the time.”
Indonesia Suspends Soybean-Import Tax as Tofu-Makers Strike (Source:Bloomberg)
Indonesia will suspend a 5 percent duty on soybean imports until the year-end after makers of tofu and tempeh halted production to protest against surging costs spurred by the oilseed’s rally to a record. The Finance Ministry will issue a ruling this month that will be effective without delay, Coordinating Minister for the Economy Hatta Rajasa said. The Trade Ministry has also held talks with importers to limit margins, he told reporters. Indonesia’s decision, and the strike by local food-makers who’d demanded the levy be dropped, reflect the impact in Asia of the worst U.S. drought in more than 50 years, which has pushed soybeans and corn to all-time highs. South Korea’s government said today it’s considering stockpiling soybeans, corn and wheat to cope with rising prices. Goldman Sachs Group Inc. has said soybeans and corn will extend gains in Chicago.
The government will “provide facility and flexibility for tofu and tempeh cooperatives to directly import soybeans” to ensure supplies, Rajasa told reporters in Jakarta. The 5 percent levy on soybean shipments had been in place since January. Soybeans rallied 32 percent on the Chicago Board of Trade this year as the worst drought since 1956 in the U.S., the world’s biggest grower, hurt supplies. Futures, which reached a record $16.915 a bushel on July 23, traded at $15.92 at 8:37 p.m. in Singapore. Goldman Sachs has a three-month target of $20.
Soybean Rally
Some Indonesian producers of tofu and tempeh, soybean-based staples, stopped production today after local bean prices surged 33 percent in the past three weeks to about 8,000 rupiah per kilogram ($841 a metric ton), according to The Confederation of Indonesian Tofu and Tempeh Makers Cooperatives. The stoppage came during Ramadan, the Muslim holy month, when followers break daylong fasts with communal meals. “About 23,000 members in Banten, Jakarta and West Java provinces that halted output this morning will soon resume production,” said Sutaryo, the group’s head of business, who uses a single name. “Supplies of tofu and tempeh will return to normal on Saturday,” he said, adding that the confederation expects the government to maintain soybean prices at about 6,000 rupiah to 7,000 rupiah per kilogram.
The drought in the U.S. may spark a rebound in global food costs through October, the United Nations Food & Agriculture Organization said on July 5. South Korea’s Agriculture Ministry will also seek to temporarily lift import tariffs on soybeans and wheat, according to an e-mailed statement today.
Import Needs
Indonesia, Southeast Asia’s biggest economy, imports about 70 percent of its soybean needs, according to Deputy Agriculture Minister Rusman Heriawan. Tofu and tempeh, derived from soybeans and eaten mainly with rice, the main staple, are key sources of affordable protein. The foods represent about 88 percent of total soybean use in the country, according to the U.S. Department of Agriculture. Indonesian inflation unexpectedly accelerated in June as food costs climbed, the Central Statistics Office said on July 2. Consumer prices rose 4.53 percent last month from a year earlier after climbing 4.45 percent in May. The country is expected to import 1.97 million tons of soybeans in the marketing year from October 2012, up from 1.9 million tons a year earlier as consumption will exceed output, the USDA’s Foreign Agricultural Service said in a report in May.
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