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High and volatile soya meal likely

18 June 2009

Soybean meal prices through early October are likely to remain “high and volatile, potentially explosive,” a leading U.S. grain marketing economist said during a  presentation at the World Pork Expo in Des Moines, Iowa, USA, June 3.


“Local shortages of soyabean meal in August and September are a definite possibility with the sharp drop in South America’s spring 2009 harvest,” said Dr. Robert Wisner, economist, Iowa State University, USA. August 1 anticipated soybean stocks of just 2.2 weeks supply versus 3.5 weeks in 2007-08 “is the tightest since at least 1965,” Wisner said. Likewise, maize prices are up 29 cents per bushel since “the April 20 break-out,” on weather concerns. One report suggests that about 1 million less 2009 corn planted acres, due to late plantings in the eastern Corn Belt, Wisner noted.

One “wild card” in soybean meal prices is that 56 million bushels of old crop bean export orders to China that have not been shipped and could be added to new crop meal exports, which would add pressure to prices. Near-term meal futures were over $400/ton in mid-June. “There is a sharp drop in soybean crush, exports are coming up, and China is stocking up on soybeans,” Wisner said.

Wisner sees “a little relief” in soybean meal prices for livestock producers in 2010, however.

The economist looks for maize prices to average $4.25/bu., but with yield problems, prices could go over $5/bu. On May 29, July maize futures on the Chicago Board of Trade were $4.36/bu., with December futures of $4.58.

Several factors are combining to drive feed prices higher. The first is delayed planting of maize acres in the U.S. Midwest. He expected some of those acres to shift into other crops, and some not to be planted at all.

A second factor, he said, is the huge drop in South American crops. In its May 12 report, the U.S. Department of Agriculture estimated total South American maize crop prospects to be down 675 million bushels from 2008 levels, with soybean production down 711 million bushels.

And the third factor is the decline in feed wheat supplies, which has been a competitor to maize. He added that one additional factor adding pressure to crop prices is a return of commodity investment funds in futures prices that is worth watching. Wisner said that weather trouble spots are dry weather in the heart of the key corn/soybean production area in China, and frost on the wheat crop and dry weather in Canada.

For the current crop year, delayed U.S. planting will likely mean yields below trend. In addition, he looks for a sharp increase in ethanol demand from mandates in the energy bill passed by the U.S. Congress, with increases in biofuel production overall. “Biofuel mandates will be enforced next year,” he said. “Biofuels mandates are on a collision course with greenhouse gas emission regulations and allowable ethanol blend levels,” Wisner said.

The only decline in demand he sees is coming from reduced U.S. livestock numbers.

Looking at the general economy, Wisner looks for three trends: a weaker dollar longer term; increasing inflation beginning in mid 2009; and higher interest rates beginning mid-2010. Wisner does not see a recovery in the world economy until at least the first quarter 2010. He looks for crude oil prices in the $55-65 level through 2009, then gradually increasing into 2011. This will increase ethanol prices, and when combined with higher government mandates, increase demand for corn. “Higher gasoline and ethanol prices reinforce corn price strength potential with weather concerns.”

 

Release Date: June 18th, 2009, source : www.feedindustrynetwork.com  
 
 

 


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