Short supply of supply continues to drive up soybean prices.
A record soybean harvest in South America and justified expectations of an above-average US harvest in fall 2013 are not enough to push current soybean prices down; on the contrary, the upward price trend continues unabated for the time being.
However, the futures prices for the later fall months have already priced in the expected high supply situation. Quotations are € 120 per tonne or 26% below the current prices in mid-July 2013.
The leading market prices are being driven by the acutely tight physical supply situation, which was initiated by the weak harvests of the previous year, exacerbated by delays in delivery from Brazil due to loading problems and, not least, further increased by the reluctance of Argentinian farmers to sell due to the high devaluation of the peso. At the same time, China's normally increasing imports were still restrained.
On the demand side, there has been virtually no hedging because no one expected such a combination of market disruptions. Anyone who currently needs goods must pay whatever price is demanded by the few sellers. Every day of a further delay in delivery or signs of lower supply in the future increases prices. The uncertain weather development in the USA is currently contributing considerably to this (so-called "weather markets").
But the tide will turn again. Brazilian exports are already increasing from month to month and Argentinian farmers are also becoming more willing to sell in anticipation of a foreseeable price collapse. US soybean stocks are in good average condition, as the weekly assessments of seed stocks confirm.
Who will give the signal for a price reversal and when? How quickly will the price fall? Possibly the USDA report on Thursday, July 11, 2013? But probably still too early!
