March 27, 2012

CBOT soy futures to rise above US$14/bushel due to drought

Due to severe drought, lower South American soy production this year is likely to push Chicago Board of Trade soy futures to more than US$14/bushel soon, top oilseed analyst Thomas Mielke said.

Worries over a lower production in Brazil and Argentina, the world's top and third largest producers respectively, have already pushed up CBOT prices about 13% this year with the May contract trading at US$13.75 per bushel on Monday (Mar 26).

"We have seen a small correction last week and I think the technical correction is over," Mielke, head of Hamburg-based research house Oil World, told a conference in Beijing on Monday.

"I expect prices of soy to reach US$14 (a bushel) quite soon and probably rally towards US$14-15 or above sometime in the next four to eight weeks, depending on South American harvest progress and harvest result."

The research house last week cut its forecast of Brazil's 2012 soy crop to 66.5 million tonnes, compared with 75.3 million tonnes in 2011 because of drought and crop fungus. It also reduced its forecast of Argentina's 2012 crop to 46.5 million tonnes, down from 49.2 million tonnes in 2011.

Oil World is likely to cut the Brazilian soy output estimate further by 1-2 million tonnes, said Mielke.

China, the world's top soy importer, has already stepped up imports from the US over the past weeks to try to source enough to meet rising demand and expanded capacity.

"China has been an active buyer over the past few weeks," he said.

China, which imports about 60% of global soy, has booked about 29 million tonnes, or 25%, more in the first half of the year, according to estimates from its official think-tank, the China National Grain and Oils Information Center (CNGOIC).