July 26, 2011

 

Near-record US soy futures prices predicted

 

 

Rabobank analysts have lifted their forecast for US Chicago soy futures to US$13.25 a bushel, up US$0.50, based on diminishing supplies.

 

Soy futures are to lose the stability which has marked the first half of 2011, and potentially approach record highs, according to the financial services provider, although it was also likely for Chicago soy futures to follow grains lower in the rest of 2011.

 

Higher volatility, along with a second year of falling world production at a time of high demand, could bring prices close to the all-time high of US$16.63 a bushel three years ago.

 

"The type of price movements we expect to see are in stark contrast to the narrow trading range of less than US$2.00 a bushel witnessed during the first half of 2011," Rabobank said.

 

10% of the US soy crop, the world's biggest, has already been rated as being in "poor" or "very poor" health, the highest for this time of the year since 2008-09, when the yield ended up at just below 40 bushels per acre.

 

The USDA is forecasting a domestic yield of 43.4 bushels per acre for this year's harvest.

 

Rabobank also warned of disappointing production in Argentina, China, and India.

 

Soy demand has been driven up by record-high margins for biodiesel manufactured from soyoil, as well as positive margins for soy crushers in China, the top soy importer.

 

"Already more than 20% of the expected US soy export volume for 2011-12 has been sold," Rabobank said, calling it "a record-large amount for this time of year."

 

This is in contrast to the USDA's downgrade of soy exports in their forecast of shipments two weeks ago.

 

"This pace of both domestic and export demand will not be sustainable for a rapidly-shrinking US soy crop," Rabobank said. "Soy prices must transition into demand-rationing mode."