Soybeans are to miss out on a rally which will send prices of the major up more than 10% by the autumn, as part of a long-term trend which will drive wheat prices back to $7 a bushel in Chicago.

Soybeans' underperformance over the last few trading days looks the shape of things to come, as the world's rising stocks "weigh on prices, at last", Societe Generale said.

The jump of 22% in global soybean output in 2009-10 might already have dragged prices lower, were it not for strong imports by China, and a reluctance by South American farmers to sell their record crops.

The oilseed's stocks-to-use ratio, a key measure of the market tightness which has a large impact on crop prices, looks set to rise above 27% by the end of the crop year from 19.4% at the close of 2008-09.

'Bearish picture'

"Ultimately a bearish picture for soybean is, in our view, inevitable," Societe Generale said.

"There is surplus of supply, and Latin American farmers will eventually have to sell their crops."

Chicago prices would average $8.70 a bushel in the July-to-September quarter, a decline of more than 8% on the current spot rate, and 7% below the $9.35 a bushel which August futures are factoring in.

Production costs 

Nonetheless, prices were not poised to go below $8.50 a bushel as this would leave them at around the cost of production in South America, and so threaten sowing cuts which were unsustainable at a time of fast-growing demand.

Indeed, such logic implied that corn and wheat prices would not fall from current levels.

"Grain prices are very close to breakeven," Societe Generale said.

Fuel and feed 

Grains also had growth in ethanol use on their side, with US regulators set later this year to increase the cap on blends of the biofuel with petrol from 10% to at least 12%.

"This means higher animal numbers in the 2010-11 season. In other words, wheat demand for feed, which rose substantially last year due to the reduced availability of corn, should remain high next year."

The bank forecast wheat prices averaging $5.00 a bushel in the July-to-September period, a rise of 12% on current spot prices, on their way to $7 a bushel by 2015.

"Asian growth will be strong enough for investors to continue to invest in commodities in general and in agriculture specifically," the bank said.

Corn prices would average $3.90 a bushel in the next quarter, a rise of 11%, before hitting $5.45 a bushel in 2015.