The combination of tight U.S. soybean stocks, strong Chinese demand and reduced production in South America continues to provide formidable fundamental support for soybean prices.

The soybean market is still not seeing much evidence that prices have risen enough to ration tight supplies in the export market, which will make prices difficult to break until traders are confident that a large new U.S. crop is on the way.

China’s Commerce Ministry on Monday said that country’s May soybean imports should reach a record high of 4.29 million metric tons (mmt) and projected imports will remain strong in June at 4.11 mmt.

This was a sharp upward revision from the ministry’s earlier import projections of 3.66 mmt for May and 2.8 mmt for June, although it was in line with trade expectations.

Chinese demand for old-crop soybeans has slowed this month. The China National Grain and Oils Information Centre (CNGOIC) said in a weekly report that demand for imported soybeans remained slow last week due to high prices, large imports and a rise in freight rates.

"Trading firms and crushers are more reluctant to book cargoes. Imports in coming weeks are seen to reduce partly also because of ample supplies at home," said the CNGOIC.

However, the limited availability of Argentine soybeans is keeping Chinese purchases of U.S. soybeans stronger than normal for this time of year.

Last Thursday’s USDA weekly export sales report showed China bought more than 7 million bushels of U.S. soybeans for 2008-2009 delivery during the week ended May 14.

Estimates of Argentina’s soybean crop continue to shrink with the Buenos Aires Grain Exchange last week lowering its estimate by another 600,000 metric tons to 32.2 mmt. The Argentine Rural Confederation, a producer group, was even more pessimistic about the crop, pegging it at only 30.5 mmt.

The Chinese have also been strong purchasers of U.S. beans for 2009-2010 delivery with neither Argentina nor Brazil expected to be able to export many soybeans past October.

China bought nearly 8.7 million bushels of U.S. soybeans for 2009-2010 delivery last week and next-year sales to China now total roughly 58.4 million bushels, nearly three times what they were a year ago.

Expectations for lower domestic soybean plantings this year are helping to support Chinese demand for 2009-2010.

There are also reports of a growing drought in China’s top soybean province of Heilongjiang, which produces about 40% of the country’s crop. According to the Heilongjiang Agriculture Commission, dry weather has affected nearly half of the province’s farm land.

Other buyers have stepped forward this month, as well, with recent weakness in the value of the dollar working to negate part of the impact of rising U.S. soybean prices for foreign buyers.

U.S. soybean export sales for the week ended May 14 hit 50 million bushels, easily exceeding trade expectations, partly due to an unexpected sale of nearly 6 million bushels to Egypt for 2008-2009 delivery.

Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.