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
"The average percent that the harvest low was of the spring
high would project a harvest low this year of $9.40 a bushel."
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 ¼ a bushel in early deals
on Thursday, down 0.5% on the day.