Asia Grain Outlook on Monday: Further soy rally likely under pressure

Lofty soy prices may not rise much further due to a lack of fresh fundamental support, but continuous frenzied buying by China will probably succeed in underpinning prices for now.

The CBOT rally since mid-November has already reflected the dominance of U.S. exports in the international markets, and good Chinese appetite, said a trader at a commodities trading house in Singapore.

"So, any further upside will probably come from continuous fund inflows in an overall upbeat market environment," and outside markets will certainly provide cues too, he added.

China's imports in December are expected to top June's record of 4.71 million metric tonnes, the China National Grain & Oils Information Center said last week. China is the world's largest soy buyer.

Meanwhile, as arrivals of imported soy seemed to be slightly delayed than expected, a strong domestic market lent support to CBOT futures, traders and analysts said.

However, as the weather in Argentina and Brazil is looking favorable for a large crop, and exports to China will likely slow down due to attractive prices of local soy, fundamentals are likely to add pressure to prices later on, analysts said.

Traders in China now expect more homegrown soy to enter the market this year, compared with last year, as subsidies under the revised government purchase plans encourage crushers to use local beans when prices are below a certain level.

"We're seeing looming pressure from the physical market. It isn't a huge pressure now, but think about the high imports and rising supplies of domestic bean -- there's at least a cap there (for soy prices)," said an executive at a commodities trading house in Beijing.