Will soybean meal prices rise again to €50 per tonne?
Soybean meal prices, which were listed at a high level until mid-July 2013, fell sharply (by almost € 13 per tonne) at the end of the same month. At that time, the changeover from the extremely scarce old harvest to the new harvest with high harvest expectations was the decisive cause.
However, the price decline did not last long, as it became increasingly clear at the beginning of August that a record soybean harvest in the USA was becoming less and less likely. Weather developments became less favorable and yield expectations became smaller with each forecast.
The weather forecasts at the beginning of the 35th calendar week, which predicted a 14-day dry and hot period, triggered a sharp upward pressure on prices. This assessment was exacerbated by the weekly stock assessments, which resulted in a marked deterioration in soybean ratings. The classification of soybean stocks as "good to excellent" fell from over 65% to 59%.
Stock market prices in Chicago reacted with a price increase of almost €5 per tonne in 3 days. For European soybean meal buyers, things became even more expensive as the euro exchange rate lost purchasing power.
However, the most recent development shows signs of calming down again. The weather forecasts were one of the decisive factors: despite the high pressure phase, a small area of rain will cross some growing regions and temperatures will not exceed 30 degrees. This means that the all-clear has been given for some production areas. However, there are other areas such as North Dakota and Iowa with serious drought damage.
The latest estimate by Lanworth, a satellite-based forecasting company, puts the US soybean harvest at just 85 million tons (previous year: 84 million tons), compared with a forecast of well over 90 million tons just a few months ago. Some analysts consider the Lanworth estimate to be exaggerated, as the previous year's drought was much less favorable.
The US harvest is not the only factor in assessing soybean price trends. It should be borne in mind that the large South American harvest has left large surplus stocks, which can offset part of the US harvest shortfall. In addition, there is a not entirely unjustified expectation that the new South American soybean area due for sowing from mid/late September will be quite extensive. This argument is supported by the very favorable ratio of soybean to corn prices of well over 3 to 1. 2.5 would be normal! This would lay the foundation for an above-average soybean harvest in Brazil and Argentina in spring 2014. It is not possible to predict the extent to which weather developments will result in deviations.
Further strong price fluctuations depending on weather developments can be expected in the coming weeks, as the US market has become very sensitive. This is due to weak inventories and steady Chinese demand. In the worst case scenario, it cannot be ruled out that the USA could reach the limit of pipeline supply, i.e. just as much as goods are moved in the processing flow.
