Soybeans

FT.com / UK - Chinese demand drives soyabeans higher

Chinese demand drives soyabeans higher

By Chris Flood

Published: April 16 2009 10:26 | Last updated: April 16 2009 22:43

Strong gains for soyabeans were the stand-out feature of trading in commodity markets on Thursday with prices reaching their highest levels this year.

CBOT May soyabeans rose 20 cents, or 1.9 per cent, to a session high of $10.55 a bushel, a six-month peak, amid strong demand from China and concerns about production in Latin America.

On Wednesday, the Buenos Aires Cereals Exchange cut its 2009 soyabean production forecast by 6.1 per cent to 37m tonnes, down 19.9 per cent from the previous year, because of drought and crop pests.

The US government on Thursday reported weekly soyabean export sales of 808,300 tonnes, with half heading to China. This strong demand has increased concerns that US soyabean stocks will be severely depleted to less than 100m bushels by the end of the current season.

One trader warned that the US soyabean market could not allow China to maintain its current pace of buying and that further price increases would be required to ration demand.

However, grain production in China was forecast to fall 8m tonnes, or 3.5 per cent, to 220m tonnes this year by the Chinese Academy of Social Science, which did not provide any crop breakdown.

China has also been buying cargos of Brazilian soyabeans, pushing prices in Brazil’s spot market sharply higher and dealers said there was growing concern that exporters were struggling to keep pace with global demand.

India’s imports of edible oils reached 609,553 tonnes in March, up 44 per cent year-on-year, amid concerns that the government will re-impose import taxes after the upcoming parliamentary elections.

Dealers also point out that open interest (active positions) aggregated for the entire US soyabean futures curve has been rising strongly, suggesting capital is flowing into the market in the hope of further price gains.

In Chicago, CBOT May wheat added 1¾ cents at $5.17 a bushel while CBOT May corn lost 2 cents to $3.82 a bushel.

Base metals were mixed after China reported its weakest economic growth in the first quarter since it first started to publish quarterly national accounts data in 1992. However, analysts pointed to stronger-than-expected industrial output and investment spending as evidence that the government’s stimulus package was working, and expressed confidence that the first quarter would prove the low point for China’s economy.

Comments from the International Monetary Fund also contributed to the subdued/hesitant mood on Thursday.

The IMF said that the historically rare combination of a deep financial crisis and a globally synchronised downturn was likely to result in an unusually severe and long lasting recession.

Manoj Pradhan, economist at Morgan Stanley, said global growth would resume in the second half of the year but warned that any recovery was likely be “anaemic”.

Copper fell 1.8 per cent to $4,730 a tonne while aluminium slid 2.3 per cent to $1,480 a tonne and lead lost 3.5 per cent to $1,495.

In oil markets, ICE June Brent rose 62 cents to $53.06 a barrel while Nymex May West Texas Intermediate added 73 cents to $49.98 a barrel.

WTI remained under pressure relative to Brent after US inventories data, released on Wednesday, brought fresh evidence of demand weakness. US crude stocks rose 5.6m barrels last week and have reached their highest level since September 1990 as refineries have cut back on production due to maintenance programmes and weak demand.

Nauman Barakat, of Macquarie, said that the data suggested US demand was not only weak but actually deteriorating and that a combination of high imports and low refinery output was a recipe for further increases in crude stocks.

Gold fell 1.2 per cent to $880 a troy ounce.

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