Edward Culchenko
Stock exchange news. Report of USDA, issued last week, has generally turned out neutral for soybeans. Positive and negative factors compensate each other:
- shortage of production (-1.3 mln. tons) happens amid shortage of consumption (- 0.54 mln. tons)
- increase of stocks (+0.35 mln. tons) amid shortage of export (-1.2 mln. tons)
- shortage of import by China (-1.5 mln. tons) happens amid shortage of its use (-0.9 mln. tons).
Current situation in China, as experts of the Department of Derivatives Trading of Forex Academy and Masterforex-V Exchange Trade, still remains uncertain: the main problem lies in the fact that there exists a program limiting the country’s price rise on oils, which makes soy refinement unprofitable amid high prices of soybeans. This, in its turn, entails the shortage of import and, consequently, influences the world’s prices, for China is the world’s leader of soybeans export.
The abovementioned factors state that in the mid-term the market of soybeans will most likely continue to be traded in the flat of 14-12 $/bushel.
The following factors are to be mentioned in the short-term perspective:
- US export sales during the week of July 7 – 14 amount to 3.7 mln. bushels, which is almost two times more than the previous book. The general export during the season of 2010-11 amounted to 41,799.1 mln. tons (+4% to the previous season). According to a number of agencies, China will turn to purchasing soy and oil of Latin America with a supply in the period of August-September;
- weather conditions, which have established over southern and south-eastern part of the USA. It is observed from the picture that the part of the territory where soy is grown has undergone the influence of hot and dry weather, which can consequently have a negative impact on future crop;
- as of July 11, 38% of beans are in the stage of blossoming, which is 5% more than the average during last 5 years; the general condition of future crop is estimated as good (in this regard 2% are in very bad condition, 6% - in bad condition, 26% - in satisfactory, 52% - in good, and 14% - in excellent condition); this factor will put the cost of beans under pressure.
Therefore, analytics of the Department of Derivatives Trading admit that there are no objective reasons for further growth, and the situation that could be observed last week is a reaction to drought in the USA + reaction to the movement of corn and wheat. Beans are still being traded within the flat of 14-12.5 $/ bushel with probable seasonal lowering.
The growth to 14.5 $/ bushel is possible only on condition that level 14 is broken and fixation at this point.
Edward Culchenko
