January 15, 2008

CBOT soybean likely to remain bullish

On Friday (Jan 11), CBOT benchmark soybean futures set a record high of US$12.98 3/4 per bushel, continuing its bullish mode which started last year.

Despite ending mixed on Monday, prices of longer term futures contracts continued to rise. July and November soybeans had risen to US$13.20 and US$12.63 per bushel respectively.

The Jan-11 report of the USDA had provided the fuel for the recent rally. In that report, USDA had lowered its projection of US soybean ending stocks for 2007/08 by 10 million bushels to 175 million bushels, its lowest level since 2003/04 if realized. US soybean production is estimated at 2.585 billion bushels, down 9 million bushels from last month's estimates.

The USDA has also reduced its estimated global soybean production by 1.3 million tonnes to 220.3 million tonnes. Output from Brazil is reduced by 1.5 million tonnes to 60.5 million tonnes. Reflecting results of a recent government survey, January's soybean harvested area in Brazil is reduced by 0.5 million hectares. Adjustments to Brazil's output were not within market expectations, triggering worries of tighter global supplies.

On the demand side, strong buying interest from China is expected to keep US soybean prices firm in the near term. In the recent months, the Chinese government had rolled out various measures to ensure sufficient supply of edible oil, including importing more US soybeans to meet the demand spike in February's Spring Festival.

RMB1=US$0.1380 (Jan 15)