The international soybean market, the main crop in Brazil and Argentina, is showing excellent prospects for South American farmers reports Oil World a reputed publication from the industry. According to the magazine soybean world demand will continue to expand, pushed by China.
At the same time, supply will see a significant contraction since many United States farmers are switching to corn, convinced that the production of ethanol will be more profitable than the oil business.
In this context the price of soybeans is forecasted to keep surging according to Oil World.
Chinese farmers are expected to reduce soybean area in 2007 to 8.6 million hectares compared to 9.1 million last year. Summer rape, an oil seed, will also experience a significant drop from 7 million to 6.8 million this coming harvest.
This scenario will force China to increase oil seed imports, particularly soybeans.
"A Chinese delegation is expected in the US next May with the purpose of purchasing commodities and the shopping list apparently includes 5 million tons of US soybeans", reports the magazine.
On the global supply side for the coming 2007/08 season conditions are limited because both Brazil and Argentina will not be able to compensate the estimated drop in the US crop as farmers move away from soybeans to corn.
"There's a potential risk of a 6 to 8 million tons shortfall for the coming crop since South America will not be able to compensate the drop in the US harvest while soybean demand keeps increasing," says Oil World.
The shortfall should have a direct impact on prices in the coming months as news about volume production reaches markets.