February 6, 2009
US soy to rally amid drought in South America
US soy prices could gain even more amid the drought that is reducing production in Brazil and Argentina and continued strong demand from China, but gains could be tempered by expected large US plantings.
Soy futures at the Chicago Board of Trade (CBOT) topped US$10.40 a bushel last month after dropping to a low of US$7.88 in early December and peaking at US$16.63 in July.
Analysts see the possibility of more price rallies and even shortages of soy in the short term if weather-related problems continue in Brazil and Argentina.
Brazil's Agriculture Ministry on Thursday (Feb 5) revised down its soy forecast to 57.2 million tones from 57.8 million tonnes last month and 60 million tonnes harvested in 2008.
Analysts said corn prices do not have the same potential due to ample supplies of competing feed wheat, reduced demand from the livestock sector and the ailing ethanol industry.
CBOT corn futures have dropped 11 percent so far this year, peaking at US$7.65 per bushel in June last year.
The drought has also hurt the country's corn production, now revised down to 50.3 million tonnes from 52.3 million tonnes estimated in January.
Analysts said the situation is especially sensitive in soy because of steady export demand.
Despite being quiet last week due to the Lunar New Year, China -- the world's largest soy importer -- has been an active buyer of US soy, reducing considerably old-crop supplies, said John Kleist, analyst with Allendale Inc.
Kleist said that it is tough to gather too much support for the corn with the lowered Argentine crop due to the fact that overall world corn demand has been soft.
