(Agrimoney) – Soybean futures are heading for a fall of 20% over 2014, a second successive year of decline, weighed by a record harvest, and the prospect of strong South American harvests to come.
But will crops in the likes of Argentina and Brazil really perform well, with an El Nino appearing to be setting in?
And what are the prospects for demand in China, the top soybean importing country?
Leading banks give their views.
Commerzbank
“Whilst the price has recently rallied to just over $10.00 per bushel in an environment of robust US exports, we are not very optimistic with regard to soybeans that this mark can be held in the near future.
“At 26m tonnes, the global surplus in 2014-15 is expected by the US Department of Agriculture to be twice as high as in the previous season – despite a further increase in demand, where the component of China’s still-robust import growth plays an important role.
“High production should propel the stocks-to-use ratio from its all-time low at 2.6% to a more comfortable 12.5% in the US and furthermore push it to a record level of more than 30% globally.
“In 2015-16, a high global harvest can again be expected. The shift in acreage in the US is to continue in 2015-16 in favour of soybeans.
“For this reason we expect soybeans to cheapen again to less than 1$10.00 per bushel near-term and think that the price will stagnate just below this mark.”
Jefferies
“January soybean futures appear to have set a post-harvest high at $10.86 ¼ a bushel on November 12.
“This has been a choppy decline with the market supported by near term demand and fund buying but pressured by the long term bearish supply outlook with a record large South American crop still likely and an increase expected in US soybean plantings in 2015.
“Prices often weaken in December and then rally into January, although not necessarily above their November high, before the decline to the ‘February break’ low.
“The long-term outlook is still bearish in our view but the market has to respond to and accommodate the very large demand outlook for the first half of the US crop year, in our view, before prices can stage a significant sell-off.
“We look for a late-spring low very near or below $9 a bushel in the July soybeans.”
Morgan Stanley
“A record US harvest and limited prospects for acreage reduction in South America should drive a rapid transition from deficit to surplus in 2014-15.
“With soybeans still attractively priced against corn, we continue to see downside to prices to discourage additional plantings next year.”
Rabobank
“Soybean prices are expected to move downwards by the first quarter of 2015, and then sideways to downwards at a significantly lower level than in previous years.
“We believe prices are likely to stay below the futures forward curve if forecast record crops in South America materialise.
“We expect combined soybean production from Argentina, Brazil and Paraguay to reach 156m tonnes in 2015. This is mainly due to an expected continued growth in acreage, and would be 7m tonnes above last year’s production.
“China’s import demand will continue to be one of the main supporting factors for soybean prices throughout 2015. Domestic soybean production in 2014 has further decreased by 3% year on year to less than 12m tonnes.
“Even so, the development of the Chinese and global economies might put a question mark on the magnitude of the growth of the animal protein sector and the respective demand for soymeal.”
Societe Generale
The Southern Oscillation Index… is squarely in El Niño territory.
“If this materialises in the December-February timeframe, dry conditions will persist in northern Brazil while warmer-than-normal conditions hit southern Brazil.
“In addition, wetter-than-normal conditions will be seen from southern Brazil to central Argentina. Combined, this could lead to varied yields across South America.
“However, if South American production does come in as expected, we expect prices to enter another downtrend in the second half of 2015 as replenishment of global soybean supplies are more than complete.”
