The soybean rally has life left in it yet thanks to "alarmingly tight" US inventories, Rabobank said, with values set to remain elevated for another month or so, and potentially reach levels well above those futures are factoring in.
The bank backed ideas of a steep fall in soybean prices later in 2014, as supplies from what currently looks like being a record US harvest come onstream.
Chicago futures will trade from $10.50-12.50 a bushel in the last three months of the year, implying an even bigger drop than forecast by futures, which are pricing in $12.34 ½ a bushel for November soybeans, and $12.40 ½ a bushel for the January 2015 contract.
However, investors expecting another lurch lower in prices for now, after a fall of some $1 a bushel over the past month, may be disappointed, Rabobank said, citing the thinness of US inventories, which are officially forecast to end 2013-14 at the lowest on record, compared with demand.
"The need to ration an alarmingly tight 2013-14 crop is likely to introduce upward price volatility over the next three months," the bank said.
"Year to day, prices have not sufficiently rationed demand to ensure adequate supply through the summer.
"Price rallies are likely needed to ration old crop stocks and imports to cover US demand through October."
Rabobank forecast soybean futures potentially hitting $14.75 a bushel during the July-to-September quarter, above the $14.21 a bushel that July futures are factoring in, and the $13.66 a bushel at which the August is priced.
The analysis was based on an idea of stocks having been run down to 287m bushels by the beginning of this month – a record low for the time of year.
This estimate which factors in data on crushing volumes, exports, and imports reported since March 1, when the US Department of Agriculture pegged inventories at 216.6m bushels.
While many investors believe that the USDA's June 1 stocks report, to be unveiled next Monday, will reveal surprisingly large inventories, "a bearish surprise in the stocks report is doubtful", the bank said.
Estimates for the stocks figure have historically "always been on the high side" relative to the actual number the USDA believes.
"Our expectation for the USDA June 1 soybean stocks is not to find soybeans, but potentially a record low."