Better-than-expected growing conditions for U.S. crops coupled with increases in South American production will drive prices lower, Damien Courvalin, an analyst at Goldman in New York wrote in a Sept. 30 report. The bank sees soybeans at $12.50 in three months and $11.50 in six months. Societe General SA is forecasting an average of $12.50 next year, or 11% less than its estimate for 2013. Prices averaged an all-time high of $14.50 in 2012 as the worst U.S. drought since the 1930s parched fields.
Record crops this season may not mean an immediate glut of supply because processors and importers will continue to deplete U.S. stockpiles before the start of South American harvests in January. Domestic inventories of 141 million bushels (3.8 million tons) on Sept. 1 were the smallest in four years, USDA data show.
Widening profit margins for processors will keep supplies tight as demand increases from makers of livestock feed and biofuel, Morgan Stanley analysts said in an Oct. 7 report. Sales of U.S. soybeans for delivery before Aug. 31 reached 25.697 million tons on Sept. 19, the best-ever start to a season.
“U.S. supplies are still going to be tight until the start of the South America harvest,” said Diana Klemme, a vice president at Grain Service Corp., an adviser and broker in Atlanta. “We are going to have a problem getting enough soybeans to load all the ships headed for China and meet domestic crusher demand.”
Hedge funds and other large speculators were still betting on higher prices, with a net-long holding of 135,252 futures and options on Sept. 24, data from the U.S. Commodity Futures Trading Commission show. The CFTC stopped issuing updates amid the government shutdown that started Oct. 1. Bullish wagers dropped 47% from a record 253,889 in May 2012 and prices tumbled 28% since reaching an all-time high of $17.89 in September 2012.
Growers in Iowa, the largest U.S. producing state, planted 3.845 million hectares (9.5 million acres) in 2013, up from 3.783 million a year earlier, USDA data show. The global harvested area will climb 2.8% to 111.76 million hectares.
Combined soybean production in Brazil, the U.S., Argentina and Paraguay will rise 6% to a record 236.2 million tons this year, capping a 53% gain in the past decade.