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Soybean prices - what does 2012 have in store?

Soybean prices declined by 15% in Chicago over 2011, a significantly worse performance than corn's, its main competitor in the "battle for acres" in farmers' sowings plans.

The drop also compares unfavourably with 34% gains in 2010.

Investor sentiment, evident in an autumn sell-off by speculators of net long positions, has been hurt by fears for the world economy and a slow start to 2011-12 for US soybean exports, in the face of strong competition from Argentine and Brazilian supplies left over from bumper early-2011 harvests.

However, growing fears for dryness damage to South American crops to be harvested early next year prompted a late-2012 rebound in Chicago soybean prices.

Barclays Capital

"China's release of soybeans fromstate reserves, the cap on retail prices for edible cooking oils and negative crushing margins for much of 2011 have weighed on import demand.

BarCap soybean price forecast 2012

Q1: $12.40 a bushel

Q2: $12.60 a bushe

Q3: $12.40 a bushel

Q4: $12.25 a bushel

Quarter average price for near-term lot

"However, lower soybean acreage in 2011, the recent slide in international prices in addition to improved crush margins and a pickup in seasonal demand are likely to bode well for higher imports into early next year."

Commerzbank

An end to the South American drought "early enough to limit the damage for the upcoming harvest… is necessary to partly offset the decline of 7% in soybean production estimated by Oil World in the northern hemisphere.

Commerzbank Chicago soybean price forecasts for 2012

Q1: $12.00 a bushel

Q2: $12.50 a bushel

Q3: $12.50 a bushel

Q4: $13.00 a bushel

Forecasts for average price, near-term contract, during the quarter

Year average: $12.50 a bushel, ($13.10 a bushel in 2011)

"By the end of 2011-12, the global stocks-to-use ratio is estimated at 18%, and even below 8% in the US.

"This leaves virtually no room for supply shortfalls, especially as China is likely to import considerably more soybeans again in the current 2011-12 crop year.

"The greater focus on corn is likely to slow the expansion of areas under cultivation for soybeans in South America and should lead to a lower soybean acreage in the US. All this should help shore up prices."

Goldman Sachs

"Soybean prices sold off sharply in November on continued favourable weather conditions in South America, weak US exports and ongoing concerns for the European sovereign debt crisis.

Goldman Sachs Chicago soybean price forecasts

Late Q1: $12.20 a bushel

Late Q2: $12.50 a bushel

Late Q4: $12.00 a bushel

Forecasts for average price, near-term contract, during the quarter

"We expect that soybean prices will continue to trade at historically low levels relative to corn prices in the near term.

"But we expect that soybean prices will outperform corn prices over the next 12 months, on either a return of La Niña weather conditions this winter, a ramp up in Chinese imports or a loss of acreage to corn next spring in the US

"Although we expect range-bound soybean prices in the coming months, the forecast for a return of La Niña weather conditions leaves risks to soybean prices as skewed to the upside this winter.

 "We therefore recommend consumers layer in asymmetric upside hedges for 2012."

Morgan Stanley

"We expect that the fight for US acreage and the need to rebuild US soyoil stocks in 2012 should continue to support November 2012 soybean prices relative to corn and wheat.

"Disappointing US production in 2011-12 necessitates more 2012 acreage.

"After a year in which US soybean production fell 9% year on year on poor yields and lower planted area, we see US acreage needing to rise by at least 2.4m acres year on year in 2012 to keep the US soybean stocks-to-use ratio from falling in the 2012-13 marketing year.

"Biodiesel production should remain strong through 2012. In the US, we expect that improving economics and a growing federal mandate will support a near-tripling year on year in US biodiesel production, fuelling a 3% year-on-year increase in the 2011-12 soybean crush demand to 1.7m bushels.

"As China seeks to rebuild its domestic hog herd after a year of low supply and high pork prices. We see China's soybean imports rising 8% year on year in 2011-12 to 56m tonnes."

Rabobank

"Soybean prices are likely to be lower year on year in 2012, but remain historically elevated, rationing demand, as global production declines.

Rabobank Chicago soybean price forecasts for 2012

Q1: $11.78 a bushel

Q2: $12.26 a bushel

Q3: $12.60 a bushel

Q4: $12.51 a bushel

Forecasts for average price, near-term Chicago lot, during the quarter

"A floor will be set based on South America's production costs and Chinese import demand, as US farmers plant a record large corn acreage in 2012-13, largely at the expense of soybean area.

 "The lower price outlook for soybeans in 2012 will be limited, given the supply constraints inherent in soybean's expansion into new territories which have a higher breakeven price floor.

"In order to offer South American farmers the profit margins required to further expand soybean planed area in 2012-13, Chicago soybean prices must remain above $10 a bushel in the third quarter of 2012, which is roughly the breakeven cost needed to bring on new soybean area in Brazil.

"The largest downside price risk to soybeans will be the potential for China's demand growth for soybeans to slow or decrease in 2012 should the global economic situation deteriorate, and threaten a slowdown to China's economy."

Standard Chartered

"We expect soybean output costs in the US and Brazil, which together account for around 60% of global soybean output, to rise by up to 17% and 30%, respectively, in the 2011-12 season, owing in part to higher land and fertiliser costs.

Standard Chartered soybean price forecasts for 2012

Q1: $13.50 a bushel

Q2: $13.80 a bushel

Q3: $13.30 a bushel

Q4: $13.40 a bushel

Forecasts for average price, near-term Chicago lot, during the quarter

Year average: $13.50 a bushel

"We do not expect a significant deterioration in yields in Brazil on account of La Niña weather conditions. We expect farmers‟ pre-season investments to keep yields slightly above trend, despite market jitters.

"We view soybean demand as being structurally robust and firmly underpinned by macroeconomic factors, including rising per-capita GDP, growing urban populations in low- and middle-income countries, and rising demand for meat, particularly

"Given the cost structure in the soybean market, prices between $9.50 a bushel and $12.00 a bushel represent good value for end users. We recommend going long July 2012 soybean futures at prices below $11.00 a bushel, with a view to reaching a target of $13.50 a bushel."

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