December 24, 2007

 

2008 to be a volatile year for soy trade

 

 

Although demand is expected to drive soy prices in 2008, volatility would prove to be the norm next year.

 

China, the world's top soy importer would influence prices. Other factors would include US and South American soy production

 

Biofuels is another new factor as soy prices near record highs on the Chicago Board of Trade, analysts said.

 

The future of demand for US and world soy would hinge on the state of China's economy and whether they could control rising inflation in food prices, said Dan Basse, president of AgResource Co. in Chicago.

 

China's consumer price index in November rose 6.9 percent from the same month last year, driven by an 18.2 percent rise in food prices, according to China's National Bureau of Statistics.

 

China's soy imports in October was up 27.3 percent from a year ago and imports from January to October was up 4.5 percent on-year, according to China's General Administration of Customs.

 

China currently accounts for up to half of US soy exports.

 

Through the first 15 weeks of the 2007-08 marketing year, sales of US soy for export are up 8 percent on the year, although accumulated shipments are down 10 percent from a year ago, according to the USDA.

 

The rise in soy demand comes amid lessened US soy acreage as US farmers catered more to corn demand from the rising ethanol industries.

 

Low soy stocks are also a concern: USDA in December estimated US ending stocks at 185 million bushels, down from a record 573 million bushels in the 2006-2007 marketing year.

 

This puts the focus on South American soy. With weather conditions as yet unpredictable, production from the region would likely wield a huge influence over next year's prices, analysts said.

 

With current prices for the January contract around $11.50, the July '08 contract could hit the US$$12.90 per bushel range, US analysts are saying.