February 26, 2010

 

Asia Grain Outlook on Friday: Soybean futures may fall to US$7/bushel

 

 

Asian soybean prices are likely to fall to about US$7/bushel over the next few months as Brazil's harvest is running ahead of schedule, stockpiles are likely to rise and storage-related hassles may force exporters to accelerate selling, trading executives and analysts said Friday.

 

Barring significant crop issues in South America or an outbreak of inflationary fears, prices may head towards US$7.50-US$8/bushel this year, ANZ Banking Group said in a research note.

 

May soybeans futures contract on the Chicago Board of Trade Thursday settled down 13 cents, or 1.35%, at US$9.63/bushel.

 

It said over the next six months global soybean stockpile is expected to rise by 20 million-25 million metric tonnes, which will put downward pressure on prices.

 

"Technical buying and short covering may support prices in the short term but by and large the message is clear that soybean market is under downward pressure and there is a potential for prices to fall to around US$7/bushel," said a Tokyo-based executive at a commodities brokerage.

 

He said buying in Asia is yet to gather pace after Lunar New Year holidays though physical trading has resumed and some purchases made this week.

 

Other traders expect CBOT soybean futures to fall to anywhere between US$7 to US$7.5/bushel this year.

 

Between 115 million and 125 million tonnes soybeans may be harvested in South America by the end of May and is expected to weigh on prices in a big way.

 

However, analysts caution that production may not be as large as is being projected if the weather plays truant.

 

The key production downside in South America is the wet weather that has been experienced of late, providing the potential for harvest delays and even crop losses, particularly in Argentina, said ANZ Banking Group in a client note.

 

It said fungal diseases in the Brazilian crop could lead to potential losses of up to 3-4 million tonnes compared with current projections.

 

However, these are uncertainties and as of now supplies are ample.

 

Demand for U.S. soybeans is easing and China is looking for more purchases from South America, said an exporter in Singapore.

 

The area in the U.S. that couldn't be planted with wheat last winter may be available for growing soybeans this year, adding further to the supplies.