June 3, 2009

Soy prices in Asia may turn slightly weaker in the near term after bellwether Chicago Board of Trade futures succumbed to profit-taking after rallying to eight-month highs, though the overall outlook remains firm due to healthy demand and concerns surrounding weather-induced planting delays in some areas of the U.S., traders said Wednesday.

 

CBOT Soy futures rallied to US$12.26 a bushel this week - their highest level since September - helped by fund buying on the back of recent strong crude oil price gains and dollar weakness.

 

Recent robust buying, particularly from China, concerns about tight old-crop U.S. ending stocks and weather-induced planting delays in some Mid-South U.S. states were also supportive.

 

In Asian trading Wednesday, e-CBOT's July soy contract was trading up 2 cents at US$12.11 a bushel, though the outlook remains firm - with a test of US$12.50-US$13.00 a bushel possible this month, said a trader with a major Tokyo-based commodities house.

"We're still looking for further upside. The decline is due to profit-taking rather than any fundamentally driven selling," he said. "China's demand remains healthy, and though there's been some talk in recent days that (CBOT's) rally has triggered some contract cancellations by Chinese buyers, I don't think the market is taking it too seriously."

 

Wet weather has caused significant soy planting delays in Arkansas, Kentucky and Tennessee, according to the U.S. Department of Agriculture.

 

The USDA's weekly crop progress data, as of Sunday, showed Kentucky's soy crop 30% planted, compared with the five-year average of 58%. In Arkansas, planting is 45% complete versus the 74% average, and in Tennessee planting at 31% complete is less than half the average of 66%.

 

In China, a drought in the country's major soy-producing Heilongjiang province is continuing to threaten crop development there, with more than 45% of the cultivated land affected, the Office of State Flood Control and Drought Relief Headquarters said this week.

 

As of late May, the drought-hit areas in the province reached 6.17 million hectares, 40% of which faced serious conditions, according to statements published on the office's Web site.

 

The drought is likely to continue in June, with limited rainfall and high temperatures expected in the province, according to local meteorological department forecasts.

 

China's domestic soy futures price gains, however, are continuing to lag behind CBOT amid concerns the government may sell its millions of tonnes of state reserves before the next harvest, traders said.

 

In India, the progress of monsoon rains has resumed after a lull of nearly five days, a senior official with the India Meteorological Department said.

 

India-based traders have said the resumption could benefit the country's soy output, which in turn would pressure domestic cash prices.

 

In other regional grains news, international demand for Australian wheat is strong, and competition has increased since the number of accredited bulk exporters swelled to 23, regulator Wheat Exports Australia said Wednesday.

 

Fifteen Australian exporters shipped out more than 5.9 million metric tonnes of bulk wheat to 39 countries in the five months ended April 30, compared with 1.7 million tonnes in the year-earlier period, WEA said in a statement Wednesday.

 

Bulk wheat exports in Australia were liberalized July 1, 2008, ending a monopoly system operated by AWB Ltd. (AWB.AU).