China eyes even more U.S. soy

China, the world’s biggest food shopper, is likely to buy more U.S. soybeans this quarter, as a withering drought is expected to cut the South American harvest, pushing soy prices up to fresh highs.

Benchmark Chicago soy has risen for three weeks on the relentless Southern Hemisphere summer, and analysts say prices could head higher, with U.S. stockpiles seen shrinking as China locks in supplies after the Lunar New Year break.

China imports 60 per cent of soybeans shipped around the world, with the bulk of its purchases coming from the United States and Brazil.

“If China starts buying U.S. beans, it will be a big catalyst for prices to move higher and a key risk to the U.S. balance sheet,” said Victor Thianpiriya, an agricultural commodity strategist at ANZ.

“We have already started to see the first signs with increasing U.S. Gulf Coast prices, which I think will continue to improve.”

Chicago soybeans rose for a fifth straight session on Monday to a three-month top on prospects of higher demand for U.S. beans. Chicago Board of Trade March soy rose around half a per cent to $12.38 a bushel, the highest since Oct. 28.

Analysts say China’s soy buys could prompt the U.S. 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 U.S. 2011-12 soybean 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 soybean 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 U.S. supplies for forward months,” said one Beijing-based soybean trader.

“It may prompt the USDA to adjust its soy stock estimate.”

On Friday, analytical firm Informa Economics cut its forecast for Argentina’s 2011-12 soybean production to 46.5 million tonnes from 51 million. It lowered its forecast of Brazil’s soybean crop to 70 million tonnes, from 72 million previously.

Brazil produced a record 75.3 million tonnes of soybeans 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 soy production would fall to 46.2 million tonnes this year from 49.2 million in 2010-11.

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