Bumper US crop 'to send soybean futures below $10'

Soybean futures are on course to fall below $10 a bushel for the first time in four years, to judge by historical patterns, Jefferies Bache said, a forecast far more downbeat than that from many other commentators.

The New York-based broker, which professes a "long term bearish view on new crop soybeans", said there is limited scope for a revival in Chicago futures in the oilseed, even if a severe weather problem does appear, given the extent of US plantings.

"Large acreage is likely to provide cushion against some loss of yield," Jefferies Bache said, adding that, from a technical perspective, a high of $12.79 a bushel reached in May by the November contract "is unlikely to be penetrated, even with a crop problem".

The $12.79-a-bushel point marked the top of a head and shoulders chart formation, viewed as a bearish price signal.

Below $10 a bushel

However, assuming the US soybean crop continues its march towards what is expected to be a record harvest, some downside remains to prices, despite their steep fall already from the May high.

Indeed, "In previous years when soybean yields were a record, the harvest low occurred after October 1," Jefferies Bache said.

The seven years since 1979 when yields hit all-time highs suggest November futures bottoming out at $9.65-9.84 a bushel, using calculations of the average low points for November contracts in those years.

A different analysis, of the five years when record yields followed seasons with tight end-stocks, suggest prices bottoming out even lower.

"The average percent that the harvest low was of the spring high would project a harvest low this year of $9.40 a bushel."

'Another $1.00-a-bushel break'

The forecasts contrast with those on Wednesday from Commerzbank, which forecast soybean futures averaging $11.50 a bushel in the current quarter and $11.00 a bushel in the final three months of 2014, on a front contract basis.

Rabobank expects prices to average $11.20 a bushel in the last quarter of 2014.

Chicago broker RJ O'Brien, Richard Feltes said that soybeans were unlike corn, for which "favourable pollination is virtually a lock" still carrying some risk premium, ahead of August which, in bringing pod-setting, is a key month for determining yields of the oilseed.

However, if a record soybean yield is confirmed, that "suggests another $1.00-a-bushel break in soybeans".

November futures stood at $10.96 a bushel in early deals on Thursday, down 0.5% on the day.

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