Soybean prices were battered lower Friday morning as the USDA released a report showing a better-than-expected crop this year.
Although the soybean crop was badly damaged by this summer’s drought, the beans recovered this fall amidst good rains.
At the peak of the drought, it had been feared the crop would yield only 35.3 bushels per acre, but Friday’s update from the USDA showed a much more optimistic 39.3 bushels per acre.
As a result of the higher yields and larger national crop, prices tumbled this week to the lowest price in more than four months.
With nearly the entire U.S. soybean crop harvested, farmers, traders, and end-users have shifted their focus to the South American crop, where Argentinean and Brazilian farmers are busy planting their summer soybean crop. Those two countries produce 45 percent of the world’s soybeans and therefore warrant close monitoring in the coming months.
As of midday Friday, soybeans for November delivery were worth $14.72 per bushel, down 55 cents this week (- 3.6 percent).
Split government pushes markets toward fiscal cliff
This week’s election results increased concerns that the U.S. government would not be able to resolve upcoming budget issues.
With the political makeup mostly unchanged by Tuesday’s contest, traders feared that President Obama and Congress might remain deadlocked about how to reduce the budget deficit.
If they are unable to reach a plan by the end of the year, automatic tax increases and federal-spending cuts would kick in, an economically damaging combination known as the “fiscal cliff.”
Out of fear that the “fiscal cliff” could lead to another recession, investors sold stocks, foreign currencies and copper in expectation that all of those assets would decline in value in a recessionary environment.
At the same time, they chose to keep their money in cash, U.S. Treasury Bonds or gold, all of which gained value this week.
By midday Friday, the Dow Jones Industrial Average had lost 180 points (- 1.4 percent); the Euro eroded by 0.85 percent, to $1.2720; and copper had crumbled four cents per pound (- 1.1 percent). During the same period, gold gained $57 per ounce (+ 3.4 percent), to $1,733, and U.S. 30-year bonds had jumped in value by 1.9 percent.
Walt Breitinger is president of Breitinger & Sons, a commodity futures brokerage firm in Valparaiso. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.