US soy futures extend gains on supply woes, stable Chinese demand

US soy futures extended gains to hover just short of a seven-month high on Tuesday (May 5) as shrinking global supplies and steady Chinese demand prompted fresh investor buying.

 

Analysts said the soy market which has risen for five straight sessions, is focusing on Chinese demand which has not shown any major signs of waning.

 

ANZ agricultural commodity strategist Doug Whitehead said Commodity Research Bureau (CRB) commodities index broke out of the trading range that could prompt an influx of new capital into the commodities markets.

 

Whitehead said that the commodities market is most likely going to concentrate on commodities that have a strong fundamental story behind them which could well benefit soy further.

 

The Reuters-Jefferies CRB index, a global commodities benchmark, settled at a near four-month high on Monday (May 4) as raw materials markets rallied amid a greater investor appetite for risk.

 

The US Department of Agriculture (USDA) reported 18 million bushels of soy were inspected for export last week, above estimates for 12-16 million tonnes and 10 percent ahead of a year ago.

 

Whitehead said that if China's buying changes it would be a risky trade going too far to the long side, adding that the trend is still bullish at the moment.

 

China's demand plus an outlook for the Argentine soy crop to shrink to at least 34 million tonnes, down 26 percent from its last harvest, has traders building in a premium to soy prices before USDA updates its crop and end-stocks forecasts on May 12.

 

Chicago Board of Trade (CBOT) soy for May delivery rose nearly 1 percent to US$11.25-¼ per bushel after rising to as high of US$11.33-¼ on Monday (May 4).

 

Corn and wheat also strengthened, tracking strong gains in the soy market and on concerns over weather delaying planting.

 

CBOT corn for May delivery rose 0.6 percent to US$4.00-½ a bushel and May wheat gained 0.3 percent to US$5.40 a bushel.

 

Corn planting is running about a week behind normal due to a cool, wet spring. USDA reported after the markets closed that 33 percent of the corn crop was planted, behind trade estimates of 35 percent to 40 percent. Typically half the crop is seeded by early May.

 

USDA said spring wheat sowings, which have been battered by recent rains, rose to 23 percent, an increase from 15 percent last week. On average, 59 percent of spring wheat is planted by early May.