June 21, 2010
CBOT corn, wheat futures up on China's yuan pledge
US corn futures climbed to a new three-week high on Monday (Jun 21), while wheat was up 1.5%, as China's pledge to allow a flexible yuan exchange rate raised expectations of higher grain consumption.
Asian currencies and stocks rose and US Treasuries fell on expectations that China would soon free the yuan from its currency peg, easing political tension with the West and encouraging investors to snap up riskier assets.
"We have already seen very strong demand from China for imported soy. With a stronger yuan you can expect higher soy imports," said Toby Hassall, an analyst with CWA Global Markets in Sydney. ''I think it is a positive factor for grains and it is also a positive step for the global economy, which is also having an impact on the markets."
China announced on Saturday (Jun 19) it would resume making the yuan flexible, signalling it was ready to break a 23-month-old peg to the dollar that had come under intense international criticism.
Chicago Board of Trade July corn rose 1.5% to US$3.66 a bushel by 0440 GMT and July wheat also added 1.5% to US$4.68-½ a bushel. July soy contract gained 0.7% to US$9.67-¾ a bushel.
A stronger yuan currency is expected to lift purchasing power and propel imports of soy into China, the world's biggest buyer, and possibly see more corn being shipped into the country.
China's soy imports in the year to September 2010 are likely to rise to a record 46 million tonnes from an early estimate of 44 million, according to estimates issued by the China National Grain and Oils Information Centre last month.
The country, which started buying US corn for the first time in four years, could also pick up more cargoes if the yuan strengthens, making domestic corn more expensive.
A cargo loaded with about 55,000 tonnes of US corn has arrived at a port in the northern province of Shandong, a first in four years.
Corn and soy are chiefly used to make feed for pigs, chickens and fish. China has the world's biggest pork industry as the country's 1.3 billion people consume half of the world's 98 million tonnes of pork a year.
