Soybean to firm slightly in 2018: Rabobank

Global biofuels policy, increasing demand for animal feed and an increase in global trade is likely to outweigh persistent high stocks of soybeans over the next year, leaving soybeans to trade above $10/bu for longer than the past two years, according to analysis published by Rabobank.

In its new report – Outlook 2018: Good buy, low prices – the Dutch bank said its base case scenario was “mildly supportive” to soybean prices trading on the Chicago Board of Trade due to normalisation of yields across the Americas as well as 3.5% annual growth in crushing demand.

The bank said global trade would likely rise to 156.3 million mt, up 5.5 million mt, with stocks falling by a similar amount to 95 million mt.

The rise in trade is largely fuelled by good crushing margins in China, which has been underpinned by lower availability of alternative feed to soymeal, such as dried distiller grains (DDGs).

“While this is likely to continue, it is not expected to contribute to incremental growth in future seasons,” according to the report’s authors – Carlos Mera and Stefan Vogel.

The analysts expect US acreage to decline 300,000 acres to 89.9 million due to crop rotation and low profitability, yet soy acreage planted is still set to outstrip corn for the first time on record.

The slackening of US production will be picked up by an increase in Brazil, which is expected to reach 111 million mt in 2019, up from 107 million mt predicted for 2018.

Argentina is expected to grow to 11 million mt in 2018/2019, up slightly from the previous year and up 57% on the harvest just finished.

$12-14/bu here we come, maybe

However, the analysts warned that prices could easily go higher potentially returning to a two-year high of $12/bu or even matching the 2011-2014 average of $14/bu, should their acreage or yield estimates be marginally wrong or the La Nina phenomenon brewing in the Pacific create droughts.

“Smaller than anticipated yields or a (year-on-year) reduction in area in the US or Brazil will disproportionately impact prices. An area drop of just 2% from our baseline would be enough to see Brazilian stocks decline by over 4.6 million mt at a constant demand,” the bank said.

“Similarly, our estimate for a marginal US acreage reduction is not a given and could turn out to be larger if the soy/corn price ratio narrows in the coming months,” it said.

The bank added that a fall in US soybean yields to 47 bushels per acre from its estimate of 49bpa would also drive up prices.

On the flip-side the bank warned that US yields of above 49.5 bushels per acre could mean stocks remain stable and put pressure on prices.

The authors estimated prices could go as low as $8.50/bu for periods of time.