Soybean Price Drops, May Not Last Long

Aug 08, 2012 05:16 AM EDT | By Sharon Robinson

The price of soy bean was observed to have dropped at the Chicago Board of Trade, to around $1.70 less than what it was a month ago. But, severe rationing of soy beans may not allow this drop in price to last very long.

Soybean prices have only 'limited' potential to fall despite the stabilisation of the US crop, thanks to the 'staggering' slump in stocks in rival exporting countries, Oil World, an online business magazine said.

Oil World added that soybean stocks in Argentina, Brazil, Paraguay and Uruguay- South America's top four exporters- had "plummeted to only an estimated 45.4m tonnes, a staggering 22.5m tonnes, or one-third, below a year earlier," as of the start of this month.

South American soybeans were also affected by drought, not unlike the soybeans in the US, but, they were harvested earlier this year.

According to data, U.S. soybeans have stabilized. But, it may not be enough fill the void being created by the depletion in South American soy exports.

"Severe demand rationing will be required, considering the sharply-reduced South American soybean stocks currently available and the prospective unusually-small US soybean stocks of, or below, 4.3m tonnes as of end-August 2012,"Oil World said.

Analysts believe that Brazil, which is currently exporting a vast amount of soy beans to other countries, is set to run out of rations in a couple of months. Livestock companies and food processors are worried.

According to Bloomberg, demand from Asian buyers China, Japan, South Korea and Thailand rose 21 percent higher in the April-to-June quarter to 17.4 million tonnes. Import of soybean meal, used as animal feed rose by 7.7 percent.

"The latest import statistics for June do not yet reveal any signs of rationing," Oil World said. "It is interesting to see that the four Asian countries sharply raised imports of soybeans and soya meal from Brazil in April/June. But this cannot be sustained. In fact, we expect this trend to be reversed, due to a lack of South American supplies."