November 13, 2012

After the USDA boosted its forecast beyond analysts' expectations on Friday (Nov 9), Asian soy prices may face further downside risk this week, prompting caution among buyers.

The USDA, in a monthly crop report, increased its estimate of soy output by 3.9%, citing beneficial rains in a number of states late in the growing season. The USDA estimated the soy crop will be 2.971 billion bushels, up from its estimate of 2.860 billion last month and above the average prediction of 2.891 billion by analysts in a Dow Jones survey.

Chicago Board of Trade January soy futures--the most active contract--fell 3.0% to US$14.5125 a bushel Friday (Nov 9), after the USDA report. Asian markets caught up on Monday (Nov 12), with benchmark soy futures on the Dalian Commodity Exchange falling 2.5% to a three-month low.

"It's likely that many buyers will stay on the sidelines, taking a wait-and-see stance after the USDA's forecast," said Kaname Gokon, deputy general manager at Tokyo-based brokerage Okato Shoji, who tipped CBOT January soy to test US$14 this week--a level last visited on June 28.

Singapore-based Phillip Futures tipped CBOT soy to trade in the "lower band" of the US$14-15 a bushel range. On the demand side, China's October soy imports fell 19% from a month earlier, to 4.03 million tonnes, but were stronger than the two to three million tonnes market participants had estimated.

Traders booked cargoes on the back of strong demand in the world's largest soy-importing country, despite higher international prices. Imports in November and December may also beat forecasts, as buyers accelerated purchases after recent price declines on the Chicago Board of Trade, the state-backed China National Grain & Oils Information Centre has said.

China buys about 60% of the world's traded soy. Its imports are expected to rise to a record 57 million tonnes this year compared with 52.6 million tonnes last year, the CNGOIC said.