Oil World sounded a bullish note on Chicago soybean prices, foreseeing
a rise at least in relation to South American values, as it lowered the bar on
expectations for US stocks, saying they will fall below the pipeline minimum.
The analysis group, citing a strong pace of exports, cut by
130,000 tonnes to 3.4m tonnes (125m bushels) its forecast for US soybean stocks
at the close of 2013-14.
That figure is well below the 3.95m tonnes (145m bushels)
that the US Department of Agriculture downgraded its forecast to on Monday.
And it would, on Oil World estimates, represent a drop of
some 430,000 tonnes year on year.
The downgrade tallies with comments from many other observers
that the USDA may still be overestimating prospects for soybean stocks at the
close of 2013-14, with Goldman Sachs pegging the figure at 139m bushels.
And, in implying an "unusually tight" stocks-to-use ratio of
just 3.7%, it leaves Chicago soybean futures vulnerable to upward pressure, Oil
"The market has to accomplish significant rationing to bring
demand in line with available supplies," the German-based analysis group said.
"It can be expected that US prices of soybeans and products
will be well supported, creating widening premiums over South American origin."
This premium will "even facilitate a boost in US imports of
South American soybeans", which the group pegged at a record 1.3m tonnes, up
300,000 tonnes year on year.
'Demand continues high'
The comments come at a time when prices of Brazilian soybeans
themselves are relatively high, averaging R$66.87 per 60kg bag (R$1,114.50, or
about $475, per tonne) last month, the highest February figure in a decade,
research institute Cepea said.
Soybean prices at the port of Paranagua rose by 8% month on
month to a February average of R$69.86 a bag.
"In spite of the advancing harvest, demand continues high and
prices increasing," said Cepea, which is linked to Sao Paulo University, also
flagging that expectations for Brazil's crop had been trimmed in the last month
or so thanks to excess rains in Mato Grosso and drought further south.
The number of municipalities in Mato Grosso, Brazil's top
soybean producing state, declaring a state of emergency has reached 17 and is
expected to grow further, due to the heavy rains which have washed away bridges
and made roads impassable.
'Losses may be as
high as 30%'
Indeed, "for farmers in the region, the wet weather has
lowered their expectations for a record soybean production," respected crop
scout Michael Cordonnier said.
"In the hardest hit regions, soybean losses may be as high
as 30% due to poor seed quality and the inability to harvest the crop."
The USDA on Monday cut by 1.5m tonnes to 88.5m tonnes its
forecast for the Brazilian soybean harvest.
However, FCStone has the figure at 87.5m tonnes, Safra e
Mercado at 86.1m tonnes, and AgRural at 86m tonnes.
The strength in soybean prices, which for May delivery stood
up 0.7% at $14.28 a bushel in morning deals in Chicago "tells us that the
USDA's crop estimates for Argentine and Brazil combined are probably too high",
Anne Frick at New York broker Jefferies Bache said.