December 21, 2011

Due to a looming global deficit for oilseeds and products, firmer soy prices are expected in the months to come, Hamburg-based oilseeds analysts Oil World stated on Tuesday (Dec 20).

"Soybean prices will soon find a bottom or have already done so," Oil World said. "The sufficiently ample world supplies of most oilseeds and products in the October-December quarter are not representative for the full 2011/12 season. On the contrary, a global production deficit is looming for oilseeds and products in coming months."

Dry weather in key South American soy countries is now increasing the risk of lower-than-expected soy production, it said.

If Brazil and Argentina receive little rain in the next four to six weeks, significant crop losses could take place, it said.

"This (dryness) could result in significant soybean crop losses of three to five million tonnes or more," Oil World said. "This could be a decisive change with bullish impacts, propelling prices of oilseeds and products considerably above the current estimates."

Oil World currently forecasts US soy export prices in Rotterdam in the Netherlands at an average of US$510/tonne for nearby positions in January-June 2012, up from US$486/tonne on average so far in October-December 2011.

"Soymeal prices have come under considerable pressure since October 2011, owing to relatively sluggish demand in some major countries (including) the US and the EU," Oil World said.

But it forecast that Argentine soymeal pellets in Rotterdam will firm to an average price of US$384/tonne for nearest forward shipment in January-June 2012, up from US$325/tonne so far in October-December 2011.

Low soymeal prices have curbed crushers' profit margins and restrained soy processing, it said. This has reduced soyoil supplies and raised soyoil's share of the soy product value.

"But crop damage in South America and appreciating soybean prices would also lift soymeal prices in the medium term," it said.