November 19, 2010

Soy and corn demand from China will gain even as the country imposes monetary-tightening measures because imports of raw materials will be needed to curb food inflation, analysts said.

"One of the most effective ways to dampen domestic food inflation is to import more, not less," said Macquarie Bank analyst Alex Bos. "We do not expect a material pullback in China's grain and oilseed import demand."

China will probably import 57 million tonnes of soy in the marketing year that started on September 1, up 13% from a year earlier, the USDA said this month. The country earlier this year bought a full cargo of US corn for the first time in four years.

China may purchase six million to eight million tonnes of corn from Argentina for delivery in 2011, which will boost demand for grain from the US, according to Macquarie.

"This news is bullish, as it will put upward pressure on US corn exports," Bos said. "It also confirms our view that China's government-held corn stocks are minimal and that another supply deficit is likely to occur later into the 2010/11 season."

Corn futures for March delivery gained 15.5 cents, or 2.9%, to US$5.5475 a bushel in Chicago. The price has gained 37% since the end of July, when Russia announced it would ban exports after the worst drought in 50 years.

Soy for January delivery rose 32 cents, or 2.7%, to US$12.37 a bushel on the Chicago Board of Trade. The price has jumped 18% this year on improved demand from China.