November 29, 2011
Soy prices in Asia may drop due to plenty supply
Soy prices in Asia will likely go to a downward pressure this week due to abundant supply, ongoing harvest pressure in many countries and a positive sowing progress in South America, trade participants said.
Soy prices may briefly test levels slightly below US$11/bushel, they said. The near-month soy futures contract on the CBOT is currently around US$11.17/bushel.
US soy output and exports are forecast to fall 8.5% and 10.4%, respectively in the current IGC marketing year that started October 1 to 82.9 million tonnes and 36.1 million tonnes.
Even though the US soy crop is much smaller than last year, it is more than offset by South American supply, said a Singapore-based executive with a global commodities trading company.
Brazil is heading for a second successive bumper soy harvest of more than 72 million tonnes. The country's exports may rise 23% this year to 36.8 million tonnes, IGC said. It said Argentina soy exports may rise 30% to 12 million tonnes. Ukraine's soy shipments hit one million tonnes last year and may rise further to 1.3 million tonnes this year.
Institutional funds, which have lost money in other asset classes such as equities are now trying to offset losses by long liquidation in agricultural commodities such as soy, a trader in Tokyo said.
He said a stronger dollar is also weighing on prices because it makes US exports of agricultural commodities more costly.
Investors are dumping positions in dollar denominated commodities as the U.S dollar has continued to rally due to the euro-zone debt crisis, Phillip Futures said in a research note.
In the cash market, South American and ex-Gulf coast US soy are currently offered around US$440/tonne, free-on-board, down 11% from year-earlier.
Traditionally during this time of the season, US sales are brisk, in tandem with its harvest, but the IGC said this time sales have progressed at an exceptionally slow pace and are a one-third lower than a year earlier.
Apart from weak crushing margins in China, large South American availabilities are also a key factor damping US sales, IGC noted.
US soy sales have started to pick up again but will have to average 372,000 tonnes every week to reach 36 million tonnes this year, ANZ Banking Group said.