Chinese buying could push soybeans over $20


The July-September quarter is traditionally a soft period for U.S. soybean exports as the world?s top buyers of the oilseed typically divert their buying interest to South American suppliers while the U.S. crop rounds out the growing season.

But the shortage of supplies in Brazil and Argentina following this year?s drought in that region has forced the world?s top buyer China to start the current quarter with a six-year-high purchase of U.S. soybeans for the month of July and show continued solid demand so far in August.

Record high domestic soy prices suggest China may have further import buying to do in the weeks ahead, and should that buying occur amid fresh fears of potential U.S. crop shortages, could prove enough to push U.S. soy prices beyond the $20 per bushel mark.

Scraping the barrel

The primary factor underpinning the soybean price in recent months has been the fact that supplies of the crop have dwindled sharply following steep production losses in both South America and the U.S. ? the top exporting regions of the crop ? just as global consumption of soybeans hit record heights.

Large end-users such as China were somewhat forewarned of and prepared for the prevailing supply tightness after having tracked the drought-hit South American growing season carefully throughout late 2011 and into 2012.

But with the subsequent U.S. crop also getting hit by crop-threatening growing conditions, soybean buyers are starting to grow concerned about the diminishing reserves of the crop.

So far China and other major importers have not started to deviate too much from normal purchasing patterns in terms of export market activity, as top suppliers Brazil and Argentina theoretically remain ?open for business.?

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