Storm damage to China's rapeseed crop has brought fresh fundamental support to the US grain markets and could push prices, already at historic highs, even higher in the months to come.
The situation in China is yet another reminder of how any unexpected shortfall in production can sharply rally grain prices at a time when surplus supplies are tight and sizeable amounts are being used to produce renewable fuels like ethanol.
"The real story is the planet is having trouble meeting consumption needs and prices are responding. We need much larger production," said Gavin Maguire, analyst for Iowa Grain. US soyabean and soyaoil futures markets soared to record highs on Tuesday as China bought massive amounts of edible oils in a continued attempt to reign in inflation and to cover its needs after the worst winter in 50 years damaged its oilseeds crop.
"Inflation in China is the big news but there's a lot going on, and with the energy markets up it gives you an overall bullish picture for commodities," said Roy Huckabay, analyst for The Linn Group. Soyabean prices started a bullish stampede Tuesday, following a surge last week in the US spring wheat futures market to a record of almost $20 per bushel, a price few thought possible and an enormous 300 percent above the roughly $5.00 per bushel level of a year ago.
"The spring wheat market told you what could happen to soyabeans," a trader said. "The bean carryout is going to be low this year so no one wants to sell soyabean futures." Chicago Board of Trade soyabean futures for July delivery rallied to a record of nearly $14.40 per bushel on Tuesday and could climb further. "Certainly the potential is there for more gains but the window is closing as South American farmers start bringing in beans," Maguire said.