Soybean futures hit a fresh eight-month high, defying caution among many investors, as Chinese trade data underlined improved expectations for purchases by the top importing country.
Soybean futures for May touched $9.49 ¼ a bushel in early deals in Chicago, the highest for a spot contract since August last year, and taking the contract close to breaching the psychologically important $9.50-a-bushel mark.
The latest gains, which took to 4.5% the contract’s gains over the past week, followed the release of Chinese customs data showing that the country imported 6.1m tonnes of soybeans last month – up 36% year on year, and a record for March.
China’s imports so far in 2016, at some 16.3m tonnes, are running 4.1% higher than in the same period last year.
‘In full swing’
“China’s soybean imports rose strongly in March,” Australia & New Zealand Bank said, adding that the demand reflected pulls from both the feed and vegetable oils markets.
Soybeans are processed into soymeal, a high protein livestock feed ingredient, and soyoil, used largely in China in foods and cooking oil – and whose appeal has been enhanced by elevated prices of rival palm oil, output of which has been sapped by dryness in South East Asia.
“Soybeans are used to replace the lower availability of other oilseeds in the domestic market,” ANZ said.
And “high” pork prices, making for “highly profitable” pig production, “is also keeping [soybean] imports high”, especially coming at a time of rationalisation in pig farming towards larger, commercial operations more likely to use bought-in feed, containing soymeal, than backyard operators.
Commerzbank said: “Chinese imports are indeed in full swing.”
‘Strong pace of trade’
The enhanced import prospects were also underlined on Tuesday by the US Department of Agriculture which, in its benchmark monthly Wasde crop report, lifted by 1.0m tonnes to 83.0m tonnes its forecast for China’s purchases in 2015-16, on an October-to-September basis.
The upgrade reflected a “strong pace of trade in the first half of [China’s] marketing year”, the USDA said, in a Wasde briefing which also reduced the estimate for domestic stocks at the close of 2015-16 by 15m bushels (400,000 tonnes) to 445m bushels.
This downgrade, which was slightly bigger than investors had expected, reflected an increase of 15m bushels, to 1.705bn bushels, in the estimate for US exports over the season.
Meanwhile, in South America, inundations have curtailed expectations for Argentina’s ongoing harvest, with talk of 5% of the crop being wrecked so far, and further rain in the forecast.
“Heavy rains in Argentina are creating trader concerns as yield loss in soybeans is being reported,” Chicago broker Allendale said.
‘Frustrating the fundamental trade’
Nonetheless, the extent of the increase in soybean prices has provoked some caution among brokers, given enhanced world stocks, which the USDA forecast ending this season at 79.0m tonnes – up more than 17m tonnes over two seasons.
The rally in prices, “continues to frustrate the fundamental trade as move continues contrary to bearish supplies”, Benson Quinn Commodities said.
At Country Futures, Darrell Holaday cautioned of the risk of a slowdown in the US export pace, given the seasonally-enhanced competition from South American exporters.
“Increasing US soybean exports can be argued, but if we see more of a drop-off than some are anticipating, that projection will be behind the eight ball pretty quickly,” he said.
Battle for acres
Meanwhile, the high prices are also seen as encouraging extra sowings of soybeans at the expense of rival crops – such as cotton and in particular corn – in the newly-started US planting season, in turn boosting world supplies further.
The much-watched price ratio between November soybean futures and December corn futures, the benchmark new crop contracts, stood at 2.43 on Wednesday – up from 2.33 a month ago, and firmly in territory seen as encouraging plantings of the oilseed compared with the grain.
At Chicago broker Rice Dairy, chief feed grains analyst Jerry Gidel flagged “talk of more soybean seedings” than market had initially expected.
(Source – http://www.agrimoney.com/news/china-import-record-adds-extra-fuel-to-soybean-price-rally–9487.html)