March 19, 2008

 

Asia Grains Outlook on Wednesday: Soybean prices may fall on global turmoil

 

 

Soybean prices are likely to keep falling during the remainder of this week on the choppy global economic scenario.

 

After staging a modest recovery in the U.S. overnight, Chicago Board of Trade futures resumed their losses in Wednesday's electronic trade.

 

At 0702 GMT, the May CBOT soybean contract was trading at US$12.80 a bushel or 26.6 cents lower than Tuesday's U.S. close.

 

"I think two factors have played a role in the fall in the edible oils complex," said Chris de Lavigne, analyst with Singapore-based consultancy firm Frost & Sullivan.

 

"One, the run-up in prices over the past several weeks in soybeans, soyoil and palm oil was overdone, so there's a correction now," he said. "Two, the jittery U.S. economic scenario is making some investors opt for liquidation even in commodities."

 

Lavigne said the long-term outlook for these markets appears unclear at this point, as they are being influenced by several outside factors.

 

"Investors may withdraw money from all asset classes as the economic troubles deepen or they may bet on agriculture as a safe haven for investment in troubled times," he said.

 

In a report Monday, Standard Chartered said short-term supply concerns for the edible oils complex is easing. It said soybean acreage in China is likely to rise this year and U.S. soybean acreage may rise by around 12% on year, while South America's soybean harvest is also likely to be higher than expected.

 

It, however, said the current downturn in prices in the soy complex and palm oil is unlikely to persist beyond the short term, as a rapid rise in edible oil demand, especially in India and China, is likely to keep prices higher in the long term.