June 18, 2013 5:54 pm

Soyabean near-term price premium boosted

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A depleted outlook for soyabean stocks is boosting the premium for supplies available in the near future, suggesting volatile trading ahead in Chicago’s futures markets.

CBOT July soyabeans rose 1 per cent to $15.27½ a bushel on Tuesday. The contract sold for $2.33 above beans to be delivered in November, a premium that has expanded 71 per cent in the past three months.

Soyabeans are crushed into vegetable oil and meal, and are used to feed swine and chickens.

Traders’ willingness to pay a high price for immediately available supplies reflects the aftermath of last year’s brutal US drought, which reduced the harvest, and strong demand.

Soyabean futures are also part of commodity indices such as the Dow Jones-UBS.

The widening premium for spot contracts will boost returns for passive investors as they sell expiring higher priced futures and buy cheaper ones.

US soyabean processing plants operated by companies such as Archer Daniels Midland and Bunge increased their monthly “crush” to 122.631m bushels in May, from 120.113m in April, the National Oilseed Processors Association reported this week.

The US Department of Agriculture projects domestic soyabean stocks will dwindle to 125m bushels by September 1, the lowest in nine years.

Don Roose, president of broker US Commodities in West Des Moines, Iowa, said: “We’re at what we believe is the pipeline minimum. We can’t go any lower than that just because we need that much beans in the pipeline.”

Prices of spot soyabean markets have been kept from rising further thanks to Brazil, which has harvested its own bumper crop and in May exported record monthly volume of the oilseed.

The US, the biggest producer, is expected to import 25m bushels this year to supplement scarce domestic supplies.

Prices for beans for imminent delivery will probably stay strong to force plants to conserve supplies before the US harvest.

“We have to slow down the crush,” Mr Roose said.

Bunge’s massive processing plant in Council Bluffs, Iowa, was on Tuesday bidding $15.8125 a bushel for soyabeans, well above futures markets, according to its website.

Spot markets could see fevered trading next week when the USDA updates quarterly estimates of national soyabean stocks on June 28. The numbers will force traders to reassess available supplies.

After September, the soyabean market is expected to cool as the government forecasts US farmers will harvest their biggest crop ever of 3.39bn bushels.

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