June 10, 2009

Asia-based soy importers are unlikely to find price relief, in the near term at least, after bellwether Chicago Board of Trade soy futures soared to nine-month highs Tuesday amid expectations of a bullish U.S. Department of Agriculture supply-and-demand report - due to be released later Wednesday.

 

Reports this week suggesting China's soy imports in June are likely to hit record highs is also being viewed as a bullish factor, observers said.

 

In Asian trade Wednesday, e-CBOT's July contract was trading down 3.00 U.S. cents at US$12.40 a bushel in thin volume, though traders said the downside is likely to remain limited - with strong overall support likely at US$12.00 due to tight U.S. ending stocks and recent weakness in the U.S. dollar.

 

A report issued by China's Ministry of Commerce Monday estimated imports are likely to reach a record-high level of 4.617 million metric tonnes compared with an estimate for May imports of 3.96 million tonnes.

 

In the U.S., soy inventories will likely decline for the sixth consecutive month in the USDA's supply-and-demand report, analysts said.

 

"Asian trading has been quiet ahead of the report, but soys look well supported due to tight U.S. old-stock supply and the spike in China's imports," said a trader with a major Tokyo-based commodities house. "A test of US$13.00 (in CBOT futures) is looking realistic, though the focus will also stay on what China will do with those stocks. If they start selling, we could be in for a correction."

 

Drought in China's major producing regions and strategic stockpiling are the main factors behind the rise in China's soy imports, and though rumors of government stock sales have been circulating, there aren't any specific volumes being mentioned yet, analysts said.

 

In other regional grain news, South Korea's KOGID Cambodia Co. plans to invest US$150 million to grow and process corn for animal feed in Cambodia for export to South Korea, a senior company official said Wednesday.

 

KOGID aims to construct "four or possibly five" corn drying plants in northwestern Cambodia's main corn producing province of Battambang and has set a production target of 180,000 metric tonnes of dried corn by 2012, said KOGID's country manager, Kyung Sung-kye.

 

South Korea imports more than 7 million tonnes of corn annually, mostly from the U.S., while Cambodia currently exports its 610,000 tonne annual corn crop mainly to neighboring Thailand and Vietnam.

 

"Currently, corn yields (in Cambodia) are very low - at around four tonnes per hectare, compared to an average of around 10 tonnes per hectare in the U.S. - but we feel with the right investment, there is the potential to double production here," Kyung said.