Expanding soybean production in the U.S. and Brazil, the biggest growers, is swelling global inventories to a record and eroding prices that Goldman Sachs Group Inc. predicts will tumble to the lowest since 2010.
Stockpiles will jump 16% to 72 million metric tons by September 2014, the biggest gain in four years, according to the average of 17 analyst estimates compiled by Bloomberg News. Goldman says futures traded on the Chicago Board of Trade will retreat 19% to $10.50 a bushel in 12 months.
Prices (CBOT:SX13) that averaged the most ever in 2012 spurred farmers to plant more and combined production from Brazil, the U.S., Argentina and Paraguay, the top exporters, is poised to reach a record. Growers also are reaping the biggest ever wheat and corn crops, driving down global food costs for five months, the longest streak since 2009, and boosting profit for buyers including Tyson Foods Inc., the largest U.S. meat processor.
“Domestically and globally, we will have big supplies this year,” said Jeff Hainline, the president of Advance Trading Inc. in Bloomington, Illinois, who has been buying and selling grain since 1977. “Record prices for soybeans provided an incentive to grow more oilseeds. Unless the dollar collapses, or there is a major weather problem in South America this year, prices will slowly erode.”
Futures dropped 14% (CBOT:SX13) to $12.955 since the end of May, the worst performer behind corn among the 24 commodities tracked by the Standard & Poor’s GSCI gauge, which gained 3.3%. The MSCI All-Country World Index of equities rose 3.2% and the Bloomberg U.S. Treasury Bond Index lost 1.6%. The Bloomberg Dollar Index, a measure against 10 major trading partners, weakened 2.3%.
Global production will jump 5.3% to a record 281.7 million tons this year as demand expands 4.3% to 268.9 million tons, the U.S. Department of Agriculture estimates. The agency postponed its monthly World Agricultural Supply and Demand Estimates report scheduled for Oct. 11 because of the partial government shutdown. U.S. output will jump 4.2% to 86 million tons, enough to meet demand for a year in China, the biggest consumer, the Bloomberg News survey showed.