Soybean Futures Higher on Strike Rumors — Daily Grain Highlights

By Kirk Maltais

-- Soybeans for July delivery rose 2.5% to $11.99 1/2 a bushel on the Chicago Board of Trade on Thursday, leading a wave of short covering seen on the ag complex thanks to rumors of new strike actions in Argentina.

-- Corn for July delivery rose 2.1% to $4.60 a bushel.

-- Wheat for July delivery rose 0.6% to $6.03 1/2 a bushel.

HIGHLIGHTS

Strike Talks: Rumors of new strike actions out of Argentina lifted both soybeans and soymeal Thursday.

Speculation over potential strike actions has spurred a wave of short covering, Terry Reilly of Marex said.

"The month of May might be highly active with strikes and agriculture flow disruptions," Reilly says.

Argentina is a major source for soybean exports that compete with the U.S. on global markets. Soymeal finished trading up 4.9% to $366.20 per ton.

Reversing Old Trends: Short covering lifted CBOT grains across the board, with traders taking cues from stronger crude-oil and natural-gas futures. Results of the USDA weekly export sales report also helped, falling within analyst forecasts and pushing many short holders to exit those positions.

"It's primarily short covering by large specs/fund as we move into the summer months," said Dan Hueber of the Hueber Report. "One could try and make the case that the moist outlook for the next week to 10 days will slow planting, but I suspect that is an after-the-fact excuse more than an actual reason."

Weather Stress: Brazil's safrinha corn -- the second yearly corn crop planted and grown in Brazil annually -- is enduring hot and dry conditions stressing the crop late in development.

"Corn [will] draw upon its limited subsoil moisture as the crop goes through the rest of pollination and grain fill," said ADM Investor Services in a note. "Damage to the crop will become more apparent with time."

Damage to the Brazilian crop may limit the amount of corn exports available on the world market.

INSIGHT

Turning Lower: Prices for fertilizer in 2024 are expected to be subject to a decline in demand, Rabobank said in a research report.

"Overall, operating costs for farmers, especially for fertilizers, are returning to pre-Ukraine war levels," Rabobank said in the note. "However, commodity prices are falling -- as a result, farmers are facing unfavorable conditions, with operating margins dropping below the average observed between 2021 and 2023."

Production of nitrogen and phosphate-based fertilizers are expected to outpace demand, the firm says, but potash inventories are expected to be in a deficit. Meanwhile, lower grain prices are expected to hold in 2024.

Currency Concerns: Demand for U.S. grain exports has been a consistent problem for grain traders, who are concerned major buyers such as China are favoring crops out of Brazil and Argentina over those from the U.S.

The recent strength in the U.S. dollar, which has risen roughly 1.4% in the past month, has made it more convenient for buyers to pick and choose shipments in cheaper currencies, keeping demand for U.S. agriculture lower.

"Sales are not likely to improve anytime soon with the dollar strength," said Jack Scoville of Price Future Group in a note.

AHEAD

-- Ethanol producer Green Plains Inc. is scheduled to release its first-quarter earnings report before the stock market opens on Friday.

-- The CFTC is due to release its weekly Commitments of Traders Report at 3:30 p.m. EDT Friday.

-- Tyson Foods is scheduled to release its second-quarter earnings at 7:30 a.m. EDT Monday.

-- The USDA is due to release its weekly grains export inspections report at 11 a.m. EDT Monday.

-- The USDA is scheduled to release its weekly Crop Progress Report at 4 p.m. EDT Monday.

Write to Kirk Maltais at kirk.maltais@wsj.com

(END) Dow Jones Newswires

May 02, 2024 15:42 ET (19:42 GMT)

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