From the December 01, 2007 issue of Futures Magazine • Subscribe!

Alternately fueled

Since early October soybeans have advanced more than a dollar to trade near $10.50 per bushel. “The motivation is the worldwide demand for energy,” says Elaine M. Kub, commodity analyst for DTN, and European and Asian buyers are aggressively locking in supplies for use in biodiesel. That frantic buying is spurred by the anemic U.S. dollar, which has made our soybeans even more attractive to non-U.S. buyers, while a strong Brazilian real is putting a damper on their exports. Noting that beans are in contango, she says the bullishness will continue with trade between $10.30 and $11.50 per bushel.

At 210 million bushels, this year’s carry-out was slightly higher than the previous estimate of 200 million, but still far below the 573 million bushels from last year. “That’s why we’ve got $10 soybeans,” says Stephen Davis, senior broker for RJO Futures.

“We think the market is very over priced and that Brazilian acres are going up more than the market expects,” says Richard Brock, president of Brock Associates. Production could jump to 62 million metric tons from 58 million next year on top of increased production in the United States, which he says will jump to 69 million acres from 63.7 million. In December, he expects trade between $9.60 and $10.40.

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