November 13, 2009

 

Asia Grain Outlook on Friday: Soy prices likely to rise; firm demand

 

 

Soy prices in Asia are likely to rise in coming sessions, following recent gains on the bellwether Chicago Board of Trade, which Thursday settled at one-week highs due to a bullish demand outlook.

 

Corn and wheat prices are likely to remain under pressure with good harvests expected in the U.S., while soy received additional support from reports of high vomitoxin levels in corn grown in much of the U.S. Midwest, sparking speculation that livestock feed producers could shift to soymeal, market participants said Friday.

 

On Thursday, CBOT's November soy futures contract rose 18.50 cents to settle at $9.8225/bushel.

 

Strong export demand and the prospect of increased soymeal demand due to the quality concerns surrounding corn attracted speculative buying, analysts said.

 

A United States Department of Agriculture report issued Thursday said private exporters in the U.S. have reported strong sales to China in the 2009-2010 marketing year that began Sept. 1. A weekly USDA export report is due later Friday.

 

In China, however, soy prices in major producing areas were lower in the week to Friday, as government subsidies for crushers damped their interest in local supplies.

 

Soy prices in Shangzhi, in the Heilongjiang province, the biggest producer in the country, were around RMB3,600-RMB3,640 a metric tonne, down RMB20-RMB40/tonne from a week earlier.

 

Processing plants in the northeast were unwilling to purchase farmers' soy as the government has offered them a subsidy of RMB210/tonne to buy reserve stocks.

 

The government will provide subsidies to soy crushers in the north and northeast for purchases of 1.95 million tonnes of soy, with 1.5 million tonnes assigned to Heilongjiang crushers, analysts said.

 

Meanwhile, farmers were reluctant to sell their soy as they expect prices to rise once the government issues details of its plan to buy the new crop.

 

Corn and wheat prices are likely to remain under pressure in coming sessions, traders said.

 

At 0711 GMT Friday, CBOT December wheat was trading down 2.75 cents in electronic trading at $5.29/bushel, after declining in the U.S. overnight.

 

Corn futures were also trading lower Friday - at 0711 GMT, the December contract was down 1.50 cents at $3.89/bushel in e-CBOT trading - having declined by 3.50 cents in the U.S. overnight.

 

Traders said both corn and wheat are likely to remain under pressure in coming sessions, with good harvest progress in the U.S. likely to weigh on the market.

 

Analysts said corn's inability to hold above $4 on the CBOT has also prompted some selling, while farmer selling has picked up on any rallies.

 

In other news, Australian wheat exports in the marketing year ended Sept. 30 almost doubled on year to 14.6 million metric tonnes from 7.4 million tonnes previously, the government's chief commodities forecaster, the Australian Bureau of Agricultural and Resource Economics, reported Friday.

 

Earlier this week, the government's Bureau of Statistics estimated wheat production last crop year ended March 31, 2009 at 20.9 million tonnes, a rise of 54% on a drought-reduced harvest of 13.6 million tonnes in 2007-08.

 

Wheat exports in September of 982,400 tonnes fell 21% from 1.24 million tonnes in August, Abare reported.