November 21, 2011


Chinese demand and weak US dollar lift soy value



The demand from China and a weaker US dollar pushed up the value of soy Friday (Nov 18), whereas US wheat also increased in a slight rebound from a four-month low in the last session.


"China is clearly using the lower price level to import. This week alone, China has evidently bought 500,000-600,000 tonnes of soybeans to build up its state reserves," Commerzbank said Friday.


China stepped up soy purchases this week to fill state reserves, buying more than 500,000 tonnes to take advantage of lower global prices, and traders said more deals were likely.


January soy on the CBOT stood US$0.06-3/4 or 0.6% higher at US$11.75 a bushel at 1227 GMT. The front month has fallen about 20% after trading as high as US$14.56 a bushel in late August.


"We see bargain hunting taking place because of the sharp drop yesterday as China will take this opportunity to buy more soybeans," said Ker Chung Yang, an analyst at Phillip Futures in Singapore.


Imports by China, which buys 60% of the soy traded across the world, are likely to climb more than 10% to around 58 million tonnes in the year to September 2012 as the nation ramps up pork production to ease tight supply, and food inflation, analysts say.


US soy export sales were on the upswing as South American suppliers appeared to finally be running low on old-crop supplies, opening a window of opportunity for US soy.


Net US soy export sales last week rose 23% to a seven-week high of 751,200 tonnes, most of it for shipment in the current marketing year, topping trade estimates for 500,000-700,000 tonnes, USDA data showed.


Corn was little changed, struggling to regain ground after the prior session's slump to a five-week low as weak US exports weighed on the market.


CBOT December corn was off US$0.025 or 0.04% at US$6.14-1/2 a bushel. The contract slipped to a low of US$6.10-1/4 on Thursday.


The USDA on Thursday reported corn export sales of 208,900 tonnes, down from last week and well below the range of trade estimates from 350,000 to 600,000 tonnes.


"Asia should take advantage of the current drop in prices to buy because the corn context remains tight with no room for a climatic adversity next year," French analysts Agritel said Friday.


A weaker dollar provided helped to underpin prices of US wheat although the euro's rebound helped to spark modest losses in Paris milling wheat futures.


The euro rose against the dollar on Friday as investors unwound bearish bets on the single currency to book profits ahead of the weekend but, with the euro zone debt crisis escalating, appetite to sell on upticks was high.


"There are few concerns relating to the 2011 harvest with northern hemisphere crops now made and prospects remaining good for Australia and Argentina," David Sheppard, managing director of UK merchant Gleadell said Friday. "Early indications for 2012 would point to another bumper crop, with US plantings projected to remain unchanged and Strategie Grains projecting the EU crop up 5%."


CBOT December wheat rose US$0.02-1/4 or 0.4% to US$5.94-3/4 a bushel. The contract had slipped to a low of US$5.90-1/4 on Thursday.

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