Grains Outlook for January 28, 2011: Soybean

Soybean prices fell back from their recent 2-1/2 year high.  Bullish factors include (1) strong Chinese demand for soybeans after the USDA reported on Jan 25 that China bought 2.74 MMT of US soybeans, the biggest 1-day total since records began in 1977 and China's customs office said China's soybean imports surged +29% y/y in 2010 to a record 54.8 MMT, (2) the USDA's Jan 12 cut in its 2010-11 US soybean production estimate and cut its global soybean production estimate after recent drought conditions in South America prompted a reduction in its Argentine soybean production estimate, (3) drought concerns that threaten the soybean crops in Argentina and Brazil, the biggest soybean producers after the US, and (4) USDA's Dec 10 hike in its US soybean export forecast to a record 1.59 billion bushels.  Bearish factors include (1) the action by Chinese soybean crushers to cancel several cargoes of soybean imports because of losses as the price of imported soybeans has risen more than local price increases, which may lead to reduced Chinese demand, and (2) weakened US demand for soybeans after the Dec NOPA soybean crush fell -2.2% m/m to 145.54 million bushels on decreased demand for cooking oil and animal feed.

Weekly US soybean exports (week ended Jan 20): 1,277.5 MT; 2009/10 (Sep-Aug) cumulative exports are up +2% y/y.

Fundamental Outlook-Medium-term Bullish -The medium-term trend remains bullish on the USDA's cut its US and global production  and carry-over estimates, concerns about South American weather, and continued strong Chinese demand.  The US stocks/use ratio is very tight at 4.2%, but the world stocks/use ratio is near average at 22.8%.

(Source: http://www.insidefutures.com/article/212861/Grains%20Outlook%20for%20January%2028,%202011.html)