November 20, 2009


Asia Grain Outlook on Friday: Soy prices may rise on bullish demand



Regional soy prices are likely to rise in coming sessions, with the market expected to continue finding support from bullish Chicago Board of Trade futures.


CBOT soy futures surged in the U.S. overnight, with the January contract ending the session 12.00 cents higher at US$10.38, despite general weakness throughout the grains complex.


At 0515 GMT Friday, the CBOT January contract was up 8.60 cents in electronic trading, with traders attributing soy's strength to a generally bullish demand outlook, despite recent strength in the U.S. dollar and a decline in crude oil prices.


A constructive demand scenario, with China's appetite for U.S. soy showing no sign of diminishing, along with bullish crush demand are the main factors keeping buyers enthused, said Greg Wagner, an analyst with AgResource Co. in Chicago.


The U.S. Department of Agriculture reported total weekly soy export sales were a net 1,349,700 metric tonnes for the week ended Nov. 12. The primary buyer was China at 724,700 tonnes. USDA reported a marketing-year-high 1,724,200 metric tonnes were shipped in the week ended Nov. 12, with China the primary destination for 914,500 tonnes.


The USDA also said that private exporters reported sales of 116,000 metric tonnes of soy for delivery to China during the 2009-2010 marketing year.


In China, soy futures rose marginally Thursday, though analysts said a downward correction appears quite likely due to expectations of high global output in the 2009-2010 crop year. However, Dalian Commodity Exchange futures may rise further still in the near term if CBOT futures continue to move higher.


Regional wheat prices may come under some pressure in coming sessions following weakness on the CBOT Wednesday and Thursday in the U.S., traders said.


CBOT December wheat closed down 3.75 cents at US$5.6250/bushel Thursday, though in the Asian session Friday December wheat was up 5.50 cents in e-CBOT trading.


Traders said the recent decline was fueled by the general sentiment that supply-demand fundamentals are not currently strong enough to support the recent rally, which has been technically inspired.


In Australia, as the harvest of winter crops gathers pace, marketing-advisory service Profarmer Australia late Thursday cut its production forecast for the 2009-10 wheat crop to 20.9 million metric tonnes from 21.9 million tonnes three weeks ago.


Commonwealth Bank of Australia also reported a cut in its wheat production forecast to 21.6 million tonnes, down 700,000 tonnes on its previous projection "as a result of frosts, dryness and heat during the critical spring flowering and filling period," it said in a brief note.


Poor yields were reported and frost damage to crops has become apparent through New South Wales, Profarmer said in a weekly newsletter.


Lack of rainfall during grain fill for later maturing crops is also expected to affect yields, contributing to reductions in wheat estimates in New South Wales, Victoria and Western Australia, which typically account for 40% of national output, it said.


The Australian Bureau of Agricultural and Resource Economics will review its current wheat production estimate of 22.7 million tonnes in a Crop Report scheduled for Dec. 8.


In other regional grain news, Japan's Ministry of Agriculture, Forestry and Fisheries Thursday bought 113,000 metric tonnes of wheat in a tender, a ministry official said.


The ministry also purchased 550 tonnes of feed grade wheat and 900 tonnes of barley in a simultaneous buy-sell, or SBS, tender, the official said.


Japan was seeking to buy 20,000 tonnes of feed wheat and 100,000 tonnes of feed barley in the tender.


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