October 20, 2008

Amidst the persistent panic in world markets, agents are counting on the good performance of the emerging market countries, especially China, to brighten a less shadowy scenario.

But for some economists, not even China will manage to counter the fury of the crisis. It will be the gravity of the American recession that sets the commodity prices.

Fábio Silveira of RC Consultores said what is being discussed now is whether the recession will be a minus 1 or 2. In the worst case scenarios, the prices of soy which are already below the pre-speculative level could return to the historic US$6 level. Yesterday, the quotation of the commodity closed the trading session on the CBOT at US$8.8025 a bushel.

During September this year, China doubled its imports of soy. The country came from purchases of 1.8 million tonnes last year and raised that volume to 4.14 million tonnes.

Glauco Monte, a risk management consultant with FCStone said in normal circumstances, this large purchase by China would have kicked the CBOT prices up. But what happened was just the contrary. In the same month that China broke soy import records, the quotations of that commodity in the American exchange dropped 17 percent.

Yesterday, 19 October 2008, Bloomberg News agency reported that the Chinese government would buy 1 million tonnes of the new soy crop from northeastern China, the principal region for the crop, next month to help the recovery of domestic market prices, which fell 15 percent last month.

The agency added that this decision by China would help heat the world soy market, since China is the world's biggest soy importer with half of the global soy trade.