Soybeans up 3% due to poor rains in Argentina

US soybeans jumped three percent yesterday, notching the biggest advance in seven months, on concerns about crop prospects in Argentina following disappointing rainfall and as China returns to the buy-side of the soybean market.

Soybeans also gained support from slow shipments from Brazil as well as technical buying on follow-through from an upturn late last week after the market had hit a one-month low on commodity fund long-liquidation.

“We saw a shift in momentum late last week so it’s technical and also the rains in Argentina, particularly in the south, were disappointing,” said Sterling Smith, futures specialist for Citigroup.

Argentina is the world’s third-largest exporter of soybeans after the United States and Brazil and is the world’s largest exporter of soyoil and soymeal.

Spot March soybeans fell to a one-month low on Thursday then reversed course on Friday to close near the session high.

When trading resumed this week, the bellwether contract initially broke above resistance at its 50-day moving average of US$14.38 per bushel and then penetrated key resistance at the 100-and 200-day moving averages of US$14.56 and US$14.57, respectively.

“China bought some old-crop beans and seeing them come back in, I think, was supportive as well,” Smith added.

The US Department of Agriculture said exporters had sold 120,000 tons of US soybeans to China for delivery during the current old-crop (2012-13) marketing year.

Corn and wheat turned downward on improved crop weather prospects in the United States while wheat found extra pressure from a big export sale by India.

Wheat and corn farmers are banking on more rain and snow in late February so they can keep nursing depleted soil back to healthier levels of moisture amid the worst drought in the US rain belt in more than 50 years.

Agricultural meteorologists said the precipitation expected in the next week to 10 days will provide significant relief for crop prospects in the US Plains and Midwest.

John Dee, a meteorologist for Global Weather Monitoring, said “this will really help add to soil moisture levels.”

Wheat also was pressured by a large sale of 750,000 tons of wheat as Indian traders jumped in to take advantage of attractive global prices. The sale is seen as a precursor of overseas sales for the harvest that will begin in March.

“Soybeans are the main price driver today with support coming from concern about the lack of rain in Argentina, which could reduce yield potential for the upcoming Argentine soybean crop,” said Rabobank analyst Erin FitzPatrick.

“There has been some rain in Argentina, but it is still not enough and more wet weather is needed. Soymeal is also very firm today as Argentina is the world’s largest soymeal exporter and any reduction in the expected soybean crop would have an impact on soymeal export availability,” FitzPatrick added.

The rain that had been expected to bring relief to wilting Argentine soybean and corn crops over the weekend was lighter than expected, raising the prospect of lower yields in the 2012-13 harvest set to start in coming weeks.

Importers are urgently hoping Brazil and Argentina will replenish tight global supplies with their large new crops in early 2013 following a devastating drought in the United States last year.

Judge’s ruling favours Monsanto

A Paraguayan judge rejected yesterday a request by soy farmers to block Monsanto from collecting royalty payments for use of the biotech company’s Roundup Ready seeds in the world’s fourth largest soybean exporter.

In their request filed earlier this month, the farmers had argued that the US company’s patent on the genetically modified strain had expired. They were inspired by a case in neighbouring Brazil where a judge ordered Monsanto to stop charging. Paraguay’s Judge Miguel Angel Rodas threw out the farmers’ request for urgent legal protection on the grounds that it was inadmissible due to the complex nature of the dispute, court documents showed. Another case requesting a similar intervention by the courts was dismissed on the same grounds by a different judge last week.

Monsanto charges farmers US$4 per ton of soybeans produced using the Roundup Ready strain, which is resistant to glyphosate-based herbicides and is present in about 95 percent of the beans produced in Paraguay.

The company cited an agreement signed with farming associations in 2004 that established payments for the use of its seed technology.

It says the deal was meant to apply until 2014 and argues that its royalty rights remain in place for as long as there are valid patents on the technology anywhere in the world.

In the middle of the conflict, the government of President Federico Franco authorized the sale of Monsanto’s Intacta RR2 Pro seeds, which also help protect crops from caterpillars.

Monsanto has started negotiating with farmers to establish a royalty payment system for the newly approved variety.

Paraguay trails far behind neighbouring Brazil and Argentina as a soy exporter, but production is growing steadily and farmers are expected to gather a record crop of 8.4 million tons this season thanks to favourable weather.

Reuters