CBOT soybeans drop to two-month low as Brazilian real slides, analysts say

By P.J. Huffstutter

CHICAGO, Oct 26 (Reuters) - Chicago Board of Trade soybean futures fell more than 2% on Monday, weighed down by currency pressure and supplies from a record US harvest entering the market, market analysts said.

The Brazilian real weakened around 12% against the US dollar in spot trading as trading in Brazil got underway on Monday, and the country's stock exchange halted trading via a circuit breaker safety mechanism, in the wake of President Luiz Inacio Lula da Silva's reelection -- undoing bullish investor sentiment after his right-wing rival led the first round of voting earlier in the month.

Traders said that the surprising comeback was particularly bearish for US soybean futures, as Lula's past efforts to bolster China's purchasing of Brazilian soybeans had shown. The weakness in the real also weighed on expectations for US soybean export demand, as a cheaper local currency can make Brazilian exports less expensive for global buyers, giving them a competitive edge over US supplies.

"Surely the election was a surprise, and that's tied to the push to the lower currency and lower prices in beans as a result," said Jack Scoville, vice president and market analyst at The Price Futures Group in Chicago. "The magnitude of the move in soybeans is from that, and has had some spillover pressure on corn, too."

Grain futures also slid sharply, dropping to multi-month lows. CBOT corn futures faced pressure from the advancing US harvest, which could further bolster large stocks and increase world export supplies, and easing crude oil prices, traders and market analysts said. Meanwhile, wheat futures were underpinned by continued disruption to Black Sea exports, they said.

All of this comes at a crucial time for US exporters, as farmers are in the midst of harvesting what is anticipated to be a hefty corn crop and a flood of soybeans. Early in the trading session, the most-active CBOT soybean contract on a continuous basis at one point dropped to $12.27-1/2 a bushel, the lowest price since August 25.

CBOT November soybeans were down 23-1/4 cents at $12.33-1/4 a bushel by 10:01 a.m. CDT (1501 GMT). Meanwhile, December corn was down 2 cents at $4.54 a bushel, and the most-active corn contract touched the lowest price seen since July 10. And CBOT wheat was down 10-3/4 cents at $6.14-1/4 a bushel — after earlier dropping to $6.12-1/2 a bushel, the contract's lowest price since July 9.

Oil prices fell $2 a barrel on Monday amid hopes of easing in the US-Iran conflict, but persistent attacks on key producer Saudi Arabia kept investors wary and prices near six-month highs.

The US Department of Agriculture is due to update its weekly crop progress estimates later on Monday. Last week, the agency reported that US farmers had harvested 64% of the nation's soybean crop and 44% of corn, below trade expectations.