December 23, 2009


Asia Grain Outlook on Wednesday: Soy price may consolidate into new year



Soy prices will likely consolidate into the new year, as the market focus starts to shift to the diminishment of price support factors.


Market participants are taking note of the U.S. dollar--expected to continue rallying-- and South American supplies that will become available in the first quarter, making consolidation around current levels in near term likely, said an analyst at an agricultural commodities trading house in Beijing. The currency and supply factors are both bearish for soy prices, with continued strong demand from China serving as a counterweight.


The benchmark January soy futures contract traded on the Chicago Board of Trade is expected to remain around US$9.00-US$10.50 a bushel, he added.


The contract ended at US$9.91 a bushel Tuesday, and was trading at US$9.96/bushel at 0648 GMT.


Recent tightness in the soy market is a knock-on effect of the 2008 drought in Argentina, with China's voracious import demand being the hallmark of this market, said Macquarie Bank in a research report Tuesday.


The China National Grain & Oils Information Center estimated earlier this month a record volume of imports, at 4.8 million tonnes, for December.


China's buying of U.S. soy should begin to wane in the first quarter of 2010 as South American supplies become available, and "this period, in our view, marks a transition for the soy market into a more bearish phase," analysts Kona Haque and Alexander Bos said in the Macquarie report.


"However, it may not be until the fall of 2010 before the world soy market returns to a definite well-supplied status, assuming the U.S. soy crop comes in near (or slightly below) last year's level," they said.


The bank estimated China's imports to total 42.6 million tonnes in October 2009-September 2010--the U.S. marketing year--up from 41.1 million tonnes in 2008-09.


Meanwhile, Argentina's 2009-10 soy production is set to hit an all-time-high 50.8 million tonnes on the back of record sowing area and good weather conditions, the Rosario grains exchange said.


"The fundamental picture is clearly changing, and it won't be a surprise if prices come under pressure," said the analyst in Beijing. 

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