September 12, 2012

Despite the recent fall from early September's record highs, strong global demand for US soy will keep soy prices firm in the coming months.

Global importers will have little choice but to compete for scarce US supplies after poor crops in Brazil and Argentina in early 2012, it said.

"Soy prices have only limited downward scope as long as US exporters face outstanding demand, primarily from China," Oil World said Tuesday (Sep 11). "The bullishness may be dampened somewhat by rapid marketing of the US crop as farmer selling is encouraged by huge premiums for nearby delivery."

US soy set a record high of US$17.94-3/4 on September 4 as the worst drought in half a century ravaged crops in the US Midwest after drought also damaged crops in Brazil and Argentina this year. But prices fell from their peaks on hopes that rain last month had helped the US soy crop, with a key USDA report on Wednesday (Sep 5) keenly awaited for the latest indication of the harvest size. Soymeal prices have also slipped back from record highs seen this summer.

"Prices seem to have met upward resistance as demand for soymeal is suffering from the eroded profitability in the livestock sector," Oil World said.

There are increasing signs that livestock farmers are cutting production as the surge in soy and corn prices this summer raises animal feed costs.

"Like soy, soymeal has only limited downward potential, at least until early 2013, given the unusually low global soymeal production shaping up in coming months," Oil World said.

Brazil's September-December 2012 soy exports are likely to fall to only 2.5 million tonnes from 7.4 million tonnes in the same period last year, Oil World said. Export restrictions in some form cannot be ruled out in Brazil to conserve domestic supplies, it added.

The US and Brazil are rivals for the position as the world's largest soy exporter. Brazil has started to import soy from neighbouring Bolivia and Oil World estimates that 250,000 tonnes of Bolivian soy and 340,000 tonnes of Bolivian soymeal will be imported by Brazil between August 2012 and February 2013.