Barclays sees global soya prices bearish

Reeling under oversupply woes, soybean prices are likely to see a global bearish sentiment over the next two-to-three months, Barclays Capital said in a report released Thursday.

Expectations of a record output trigger the bearish outlook despite recent significant reductions in supply forecast, the report said.

Soybean futures prices on the Chicago Board of Trade have rallied to above US$6 a bushel after having dropped to below $5 in February. "These (higher soybean prices) still are quite lower than last year's peak of $10 a bushel," the report said.

The rally has, however, seemingly run out of steam due to "still bearish medium-term fundamentals," Barclays' The Commodity Refiner report for the April-June quarter said.

The recent increase in soybean prices was largely due to significant reductions in forecasts of Brazilian soybean output due to drought in southern districts and the impact of the Asian Rust Fungus. The windborne fungus, if untreated can reduce soybean yield by up to 80 per cent.

According to estimates, Oil World forecasts Brazil soybean crop this season at around 50 million tonnes while the US Department of Agriculture expects output of 54 million.

According to USDA's latest estimates, global soybean output for the current season is pegged at 219.2 million tonnes against the forecast of 231 million in December.

The output forecast is still at a record level, 16.1 per cent higher over the previous year compared with 6.8 per cent higher consumption estimate.

Latest projections peg global season-end soybean stocks at 52.6 million tonnes, against the earlier forecast of over 60 million.

Even with significant downgrades in supply, and with passive and active money following into soybean, soymeal and soyoil contracts on the CBOT, prices remain 40 per cent below their peaks, the report said.

The downgrades in projections have "helped the market find a base, but have done little to dent the perception that the market surplus might be slow to dissipate," the report said.

The primary weakness within the soy complex continues to be soybean, with meal and oil inventories expected to be relatively flat.

USDA projects season-end soyoil inventories at 1.61 million tonnes, a rise of 0.08 million and soymeal at 4.19 million tonnes, a fall of 0.02 million.

"Even with China continuing to be the dynamo on the demand side, it is the rising soybean inventory cover that we expect will dominate market sentiment and reinforce the bearish forward view," Barclays said.