Rabobank cuts forecast for soybean futures
By - Published 02/06/2014

Rabobank deepened expectations for the drop in soybean prices ahead, despite a relatively downbeat forecast for US production, but remained upbeat on prospects for palm oil futures.

The bank cut by \$0.50 a bushel to \$11.50 a bushel its forecast for average Chicago soybean futures prices in the October-to-December quarter, and by \$0.95 a bushel to \$11.25 a bushel its estimate for the average value in the first three months of 2015.

That foresees a far bigger fall from current levels, close to \$15 a bushel, than investors are factoring in.

Chicago soybean futures for November were trading at \$12.23 ½ a bushel in early deals on Monday, down 0.8% on the day, with the March 2015 contract at \$12.33 a bushel, down 0.9%.

Triple record?

The bank was in fact more downbeat than many other commentators on the prospect for a jump in US soybean output this year, forecasting a harvest of a record 3.48bn bushels.

The US Department of Agriculture forecasts output 160m bushels higher, based on a forecast of sowings, at 81.5m acres, and yield, at 45.2 bushels per acre, setting all-time highs too.

Rabobank said: "While record planted acres, yield and production are possible, it is unlikely," with improved spring sowing conditions likely to see more ground going to corn, for which the sowings window closes earlier than for the oilseed.

Plantings were more likely to come in at 80.5m-81.0m acres, the bank said, adding that even this expansion in area, of at least 4.0m acres, would "push soybean production into areas where yields are historically less", curtailing the national average to 43.8 bushels per acre.

'Bearish view'

Even so, the rise in production was enough to support a "bearish view" on prices, especially with exports from South America accelerating.

"Global fundamentals continue to loosen as record volumes were exported out of South America by May.

Exports from Argentina, Brazil and Paraguay in the February-to-May period were, at 32m tonnes, 27% higher year on year.

"Brazil in particular exported 6m tonnes more year on year."

'Weather risks persist'

However, elsewhere in the oilseeds complex, Rabobank remained more optimistic than investors on prospects for palm oil prices, seeing them recover to 2,700 ringgit a tonne in Kuala Lumpur in the last quarter of 2014.

The benchmark August contract closed on Monday down 0.3% at 2,416 ringgit a tonne, the weakest finish in seven months, if representing a significant recovery from an intraday low of 2,386 ringgit a tonne.

The November contract closed at 2,420 ringgit a tonne.

Growth in the discount of palm oil to rival oilseed soyoil would "encourage substitution of demand over coming months… especially with the Ramadan festival approaching", Rabobank said.

Furthermore, "weather risks persist", with a potential for early 2014 dryness yet to curtail output later this year, by when an El Nino may have kicked in too, further threating output, with the weather pattern linked to dryness in major South East Asian palm production areas.

Separately, Indonesian palm oil producer Anglo-Eastern Plantations forecast that prices of the vegetable oil "will remain generally stable due to the increase in demand from biodiesel and modest levels of industry output".

Wheat forecast

Rabobank, noting "good crop conditions globally and improved moisture in the US", also trimmed expectations for Chicago wheat futures in the July-to-September quarter by \$0.20-a bushel to \$6.20 a bushel.

However, the forecast for prices in the October-to-December period was raised by \$0.40 a bushel to \$6.00 a bushel, reflecting the potential for the El Nino hitting Australian output too.

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