December 26, 2008

US 2009 soy demand outlook grim

US soy's 2009 demand will depend on Chinese imports, corn and soy crop harvests as well as the volume of livestock herds and poultry flocks.

Dan Basse, the president of AgResource's Basse predicts a price range of US$7.50 to US$13.50 a bushel, with the lower end likely on favourable South American weather and if the global economy recovers.

Allendale Inc.'s Joe Victor said financial problems will reduce soy yields, as farmers will have less money to buy fertilisers and products to ward off plant diseases.

There are a few bright spots on soy demand though, as up to 56 percent of the current US marketing year sales are taken up by the China market. The CBOT market is also expected to rally once the global financial crisis is over.

However, concerns linger on such as falling animal feed demand, due to lower livestock herds and poultry flocks.

Mike Zuzolo, an analyst with Risk Management Commodities Inc. said that the liquidation of herds since early this year has lowered feed use, and a change will not kick in until mid 2009, as it takes time to rebuild hog herds.

In addition, imported feeder pigs from Canada have declined 250,000 head from last year. The combination of import drops and US herd reductions could lead to 4-percent less hogs on feed heading into 2009, said a livestock analyst.

Lower soy prices have also led to slower crushing rates. This trend is poised to continue into early 2009.

Victor sees prices related with macroeconomic trends. If crude oil slides to US$40 a barrel, soy prices would settle into a US$6.50 to US$9.50 range, with its true value US$7.00 a bushel, Victor said.

Conversely if crude oil increases back to US$60 a barrel, soy prices could jump into a range of US$8.00 to US$11.00 with its true value at US$9.50 a bushel, he said.