Chinese demand and Reversal date support Soybeans signal

The recent correction ended on the 11/9 reversal swing date where the Soybeans formed a low pivot and turned higher. The market continued to climb and finally breakout of the A-B-C continuation pattern. The reversal signaled the end of the correction days before the news of Chinese demand appeared in the Bloomberg report.

January Soybeans

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Bloomberg.com

Nov. 19 (Bloomberg) -- Soybean prices may gain 20 percent by March as economic growth in China, the world’s largest importer, boosts demand for animal feed and cooking oil, a U.S. exporter group said.

The oilseed may surpass the nine-month high of $12.3650 a bushel reached June 5 in Chicago before new supplies from Brazil and Argentina, the largest exporters after the U.S., become available, said Danny Murphy, treasurer of the U.S. Soybean Export Council.

Soybeans climbed to a three-month high yesterday and have gained 4.6 percent this year as imports by China are set to reach a record. The nation’s demand for the oilseed protein meal may expand 27 percent in the next decade as rising meat consumption boosts demand for stock feed, according to HighQuest Partners, a consulting company based in St. Louis, Missouri.

There will be a “substantial increase” in Chinese demand this marketing year, Murphy said yesterday in an interview in Tokyo. China’s potential market for soybeans “could be three- times or four-times of what it is today as the economy continues to grow,” he said.

Chinese soybean use for crushing will grow 7.6 percent from a year earlier to 44.1 million metric tons in the 2009/10 year, the U.S. Department of Agriculture forecast on Nov. 10.

About 5 million tons of U.S. soybeans have been delivered to China since Sept. 1, and an additional 10 million tons are booked for delivery, council Chief Executive Officer Miguel Escobar said in the same interview. The U.S. sold 19 million tons in China in the year ended Aug. 31, he added.

U.S. Exports

U.S. soybean exports may grow 4 percent to about 40 million tons in the year ending Aug. 31, 2010, as a weaker dollar makes the product more competitive to buyers overseas, Murphy said. The dollar this week dropped to the lowest level since August 2008 against a basket of six major currencies.

Soybeans for January delivery gained 0.3 percent to $10.305 a bushel as of 12:27 p.m. in Tokyo. Prices climbed to a record $16.3675 a bushel on July 3, 2008, amid a rally in global food prices. Soybeans fell to a six-month low of $8.7875 on Oct. 5 amid forecasts of a record U.S. harvest.

U.S. farmers will harvest 3.319 billion bushels this year, up 12 percent from last year, and almost double stockpiles before the 2010 harvest, the Department of Agriculture said Nov. 10. The U.S. is the world’s top producer and exporter.

Global output will climb 19 percent from a year earlier to 250.2 million tons, raising reserves to 25 percent of projected consumption, the USDA said.

Economic Growth

Chinese soybean imports may exceed 3.5 million tons in November on lower costs, the China National Grain & Oils Information Center said Nov. 17. Chinese imports fell for a fourth month in October to 2.52 million metric tons after reaching a record 4.71 million tons in June.

The country’s economy grew 8.9 percent in the third quarter from a year earlier, the fastest pace in a year, as stimulus spending and record lending growth helped the nation lead the world out of recession. The median projection of economists surveyed by Bloomberg News is for GDP to jump more than 10 percent in the final three months of 2009.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net

Last Updated: November 18, 2009 22:50 EST