November 24, 2010

CBOT corn and soy advance on South American weather and China Demand
 

Soy increased for a third day and corn extended Tuesday's (Nov 24) rally as dry weather in South America may affect grain and oilseed harvests amid high demand from China.

January-delivery soy increased as much as 0.7% to US$12.48 a bushel on CBOT before trading at US$12.44. Corn for March delivery gained as much as 1.1% to US$5.49 a bushel before trading at US$5.4675.

Unfavourable weather this week will cause a two-month rainfall deficit of 7 inches (18 centimetres) across fields in South America, according to T-Storm Weather. A La Nina phenomenon has lessened soil moisture, the forecaster said. The US is the world's largest exporter of corn and soy, followed by Brazil and Argentina.

"Weather in South America could be a main theme for the coming two weeks as US crops have been harvested and now the focus is on South America," an analyst said. Prices of soy and corn will likely increase as dry weather will reduce production, he said.

Brazil soy and corn farmers may experience the same drought that damaged 13% of its grain and oilseed crops five years ago, said another analyst.

The southern part of Brazil has gotten below-average rain since October due to a La Nina weather pattern, bringing up concern that crops being planted now will be damaged before next year's harvest, the second analyst said. Brazil is the world's second-largest soy shipper and third-largest corn exporter.

Grain prices also increased as there is strong demand from China although it tries to curb inflation, hoarding and speculation in agricultural markets, the first analyst said.

The China Banking Regulatory Commission said it will increase loans to the agricultural industry with an emphasis on crops facing shortages, including rice, corn, vegetables, cotton, and sugar.

China's northeastern Heilongjiang province, the country's top supplier of corn and soy, said that large buyers of grain, including Cofco Ltd., Chinatex Corp. and foreign-owned companies must report to authorities every five days on the progress of their purchases in the province.

"This could be part of China's attempt to stop importers storing up food," the first analyst said.