May 20, 2010

US soy futures show increase on slow farmer selling

US soy futures rose 0.6 % on Thursday (May 20) as the market recovered from a two-month low, while corn gained 0.5% as talk of new Chinese buys supported Chicago grains.

Corn prices received support from talk among Chicago traders in the previous session that China, which already has committed to its largest US corn purchases in nearly a decade, was signing new deals.

"Corn continues to garner support from talk that Chinese import business has been concluded in last couple of days," said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia. "There were discussions that they are going to remain in the market for a year or so, now that is something supportive for prices."

The USDA said early on Wednesday (May 19) that exporters sold 124,000 tonnes of corn to an unknown destination.

In the soy market, support came from tight supplies at processors and elevators around the US Midwest, which lifted the cash market.

Soy basis bids continued to rise at US Midwest processors. Many producers have sold portions of their crops at prices higher than current cash levels and are waiting for futures to rebound before selling more.

Additional support for the soy market stemmed from talk of Chinese buyers cancelling purchases of South American soy and replacing them with US supplies.

"The primary reason why people are expecting softer oilseed prices over the next few months is because Chinese purchases would switch to South America, but if that is being reversed, it is going to put some pressure on what are reasonably tight US stocks," said Mathews.

Chicago Board of Trade July delivery corn rose 0.4% to US$3.60-½ a bushel by 0425 GMT and soy for July gained 0.6% to US$9.44 a bushel.