IFC Markets | Jul 06, 2016 09:53AM ET
Soy dynamics diverse from other grain futures
Soy prices slumped on Tuesday amid improved outlook for crops in US and Brazil and mixed data in China. Soy fell less than 10% from its multi-month high reached in first half of June. Meanwhile the corn and wheat prices tumbled more than 20% while rice lost around 15%. Will the soy continue falling in price?
US Middle West suffers from rains after a spell of hot and dry weather and it may support grain crops. About 20% of crops still suffer from drought. Some market participants assume prices may fall further in case of rains in South-Eastern part of Iowa and Western Illinois. The price of corn and wheat fell to the lowest since 2006 in US Chicago Board of Trade. This could have happened on lower demand on biofuel amid cheap oil in global markets. Soy planting acreage may gain 3.5% to 34.3mln hectares in Brazil in this agricultural season. Meanwhile its crops are to reach 100mln tonnes and surpass the last-year level of 95.6mln tonnes. This June Brazil has cut soy exports by around 2mln tonnes compared to May and June 2015 which supported the prices. China is the world leading soy importer and accounts for around 64% of global soy imports followed by Japan and Mexico. The slowdown of the Chinese economy may cut demand for alimentary and commodities. The Chinese economic data came out mixed on Tuesday. As a result, some market participants began to doubt the monetary stimulus by the People’s Bank of China is effective enough. The Services PMI by Caixin/Markit rose in June 2016 to the 11-month high while the similar composite index which includes industrial production slumped to the 4-month low. The official June manufacturing production data will come out in China on July 15, they may be below the tentative outlook.
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