November 23, 2009

US seen to be key soy supplier

US will be the key supplier of soy exports until the next South American harvest as soy prices find support from increased export demand.

The USDA export projections were increased 20 million bushels with export inspections totalling 59.5 million bushels. China remains the largest buyer.

Weather problems are now thought to be factored into market prices. Grain supplies are adequate for short term demand. Export demand is driving the markets in feed and fibre. Ocean freight prices are increasing with oil prices making US exports more expensive.

Corn quality problems are shifting demand to soymeal. Chickens on feed are still down 2 percent, but that is compared to 5 percent earlier in the year. Cattle on feed are up 5 percent four months consecutively, which is fundamentally bullish for grain demand.

Soy ending stock estimates bearishly increased 95 percent at 270 million bushels. World ending stock estimates were increased 35 percent to 57.5 million tonnes. Yields are turning out slightly less than predicted. Export sales remain above average. Soy crush was above expectations at 155 million bushels.

Quality problems are becoming a market factor for corn. The crop is only 54 percent harvested and most of that has high moisture. Diseases affecting feed use have been found in some corn. Test weights are lower than expected. Low quality corn is best suited for ethanol production.

Buyers are concentrating on soy and ignoring corn in the short term. Export inspections were at a disappointing 22 million bushels. Total inspections for the year are 4.5-percent behind average. Export sales are lagging behind predictions.

Mexico bought 210,000 tonnes of US corn last week. Farmer selling increases at US$4. Wet infected corn is more difficult to place in storage. Chinese production is below average.

Wheat prices continue to follow the relative dollar value as compared to other currencies. Lower dollars increase exports but higher dollars decrease demand. The market sentiment is that investor commodity buying is overdone. Wheat pricing is due for correction.