August 2, 2012

Global soy price to remain high despite US rain

As US suppliers keep soy sales low, global soy prices are likely to stay high in coming months even if rain alleviates drought-stricken US crops.

Global soy buyers have little choice but continue to purchase US soy following poor crops in Brazil and Argentina this year, Oil World said.

"A cautious management of US soy disposals will still be required in the next five to six months, even if the last-minute rainfall prevents the worst for the US crop," Oil World said. "This will limit the downward (price) potential for soy, at least until there is some certainty that South America will indeed produce record crops in early 2013."

Rain last week may have helped crops suffering from the worst drought in 56 years in the US Midwest. It is now hoped the record soy prices reached in July will encourage South American farmers to plant more soy for their 2013 harvests, so relieving tight global supplies.

Soy prices are likely to remain volatile in the near to medium term despite support from scarce supplies because of profit-taking and weakness provided by demand destruction, Oil World said.

"By the end of February 2013, US soy stocks will be reduced to a level at which domestic demand for soy and products will be difficult to satisfy in March/August 2013," Oil World said.

"This already sparked a debate on whether the US will need to import soy from Brazil next year to bridge the looming supply gap.

"But for the time being, this represents only a theoretical option and the market will probably try to enforce the necessary worldwide demand rationing via prices in the first half of next season in order not to run out of supplies."