China, the world's biggest food shopper, is likely to buy more US soyabeans this quarter, as a withering drought is expected to cut the South American harvest, pushing soya prices up to fresh highs. Benchmark Chicago soya has risen for three weeks on the relentless southern hemisphere summer, and analysts say prices could head higher, with US stockpiles seen shrinking as China locks in supplies after the Lunar New Year break.
China imports 60 percent of soyabeans shipped around the world, with the bulk of its purchases coming from the United States and Brazil, the world's top exporters. "If China starts buying US beans, it will be a big catalyst for prices to move higher and a key risk to the US balance sheet," said Victor Thianpiriya, an agricultural commodity strategist at ANZ.
"We have already started to see the first signs with increasing US Gulf Coast prices, which I think will continue to improve." Chicago soyabeans rose for a fifth straight session on Monday to a three-month top on prospects of higher demand for US beans. Chicago Board of Trade March soya rose around half a percent to $12.38 a bushel, the highest since October 28.
Analysts say China's soya buys could prompt the US Department of Agriculture (USDA) to lower its 2012 closing stock estimates, a bullish factor for prices. Fourteen analysts surveyed by Reuters said the USDA may slightly lower its estimate of US 2011/12 soyabean ending stocks to 273 million bushels from its January forecast of 275 million.
The drought in Argentina and southern parts of Brazil is likely to result in lower soyabean yields, although the final outcome will depend on February rains. "If production is reduced as much as estimated by some institutions, we believe Chinese buyers will surely shift to US supplies for forward months," said one Beijing-based soyabean trader.
"It may prompt the USDA to adjust its soya stock estimate." On Friday, analytical firm Informa Economics cut its forecast for Argentina's 2011/12 soyabean production to 46.5 million tonnes from 51 million. It lowered its forecast of Brazil's soyabean crop to 70 million tonnes, from 72 million previously.
Brazil produced a record 75.3 million tonnes of soyabeans last season and is expected to harvest 71.5 million tonnes this year, according to its agriculture ministry. The Buenos Aires Grains Exchange estimated Argentina's soya production would fall to 46.2 million tonnes this year from 49.2 million in 2010/11.
"They (Argentina) have had rains and the forecast looks okay but there are going to be pockets that will suffer due to La Nina," said Adam Davis, a senior commodity analyst at Merricks Capital in Melbourne. "The crop is going to continue to drop and once they start getting into harvest there might be evidence of how poor the yields are."
With demand for US beans likely to rise, analysts have raised their price forecasts. Goldman Sachs raised its three-, six- and 12-month price forecasts for CBOT soya to $12.90 per bushel, from $12.15 previously, largely on lower output from South America. Port congestion in Brazil, which is estimated by the USDA to unseat the United States as the world's No 1 exporter, is threatening to worsen the supply situation.
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