Soybean futures are on their way to their lowest since 2009, weighed by a “heavily oversupplied” market for the oilseed – but investors are right to bet on recoveries in corn and wheat prices, Macquarie said.
For soybean futures, “the two-year outlook remains bearish”, the bank said, citing the boost to expectations for sowings of the oilseed from prices which remain relatively high compared with those of some competing crops.
In the US, “with soybeans still being attractively priced against corn, soybean plantings will likely expand by another 5% over the next season,” to a record 87.9m acres, Macquarie said.
And while the bank was relatively downbeat on prospects for inventories in the US at the end of 2014-15, citing strong export and crush prospects, and in its estimates for Brazilian and Argentine inventories, this was not cause enough for price support.
“The global soybean supply and demand balance sheet still remains heavily oversupplied through the current period and into the 2015-16 season,” the bank said, adding that it was “time for underperformance” in prices of the oilseed.
Indeed, Macquarie forecast a continued decline in soybean futures to average $9.00 a bushel in the fourth quarter of this year and $8.70 a bushel in the same period of 2016 – a price not seen since March 2009.
It also implies a fall ahead in futures prices, with Chicago’s November 2016 contract currently pegged at $9.66 a bushel.
‘Corn acreage losses’
Conversely, for corn, investors look justified in forecasting a return over $4 a bushel from late 2015, the bank said.
Although futures will for the first half of the year remain under pressure from strong US inventories, the first estimate for US sowings of the grain, released in June, “may be the fundamental trigger for price reversal and turn sentiment around.
“We expect to see further corn acreage losses into the 2015-16 season, as high logistic costs push farmers toward soy in the northern US Plains,” Macquarie analyst Colin Hamilton said, pegging sowings this year at what would be a five-year low of 86.1m acres.
And with sowings of safrinha corn likely dented by low prices and a late soybean harvest, a reflection of delayed plantings,”2015 will be a year of supply adjustment, which should yield higher prices into 2016″.
‘Major supply risk’
For wheat too, Macquarie forecast a rise in prices ahead to $6.15 a bushel in Chicago by the October-to- December period – well above the $5.67 Ѕ a bushel that December 2016 futures were factoring in on Tuesday.
While futures will likely “stagnate” in the first half of 2015, “supply risks for the 2015-16 season will return into the market and support prices going into 2016”, the bank said.
“Stronger feed demand and a recovery in corn prices will also contribute to the upside.”
The outlook reflects “the major supply risk” in the US – where winter wheat sowings for the 2015 harvest fell sharply, and the condition of what has been planted has deteriorated too – and in Russia and Ukraine too.
With regional tensions sapping farm financing, Macquarie forecast Ukraine’s wheat harvest this year at some 22m tonnes, down about 3m tonnes year on year, with Russia’s crop see dropping by about 5m tonnes to 54m tonnes.
(Source – http://www.agrimoney.com/news/soybean-futures-to-hit-7-year-low—but-corn-wheat-prices-to-gain–7882.html)