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Oilseed Markets Under Pressure For Now

Large global oilseed supplies, a lack of economic confidence, and expectations for increased world oilseed production, should all serve to keep U. S. soybean and Canadian canola markets under pressure through the first half of 2009, according to a U. S. analyst speaking at the Canadian Wheat Board’s annual GrainWorld Conference in Winnipeg, Feb. 23.

Daniel Basse, president of the Chicago-based AgResource Company, expects to see increases in world oilseed production in 2009 given the relatively cheaper cost of production for oilseeds compared to grains.

Basse forecast global production and demand of soybeans would both be up slightly on the year. However, he expects demand to rise at a slower rate, causing ending stocks to increase on the year. As a result, Basse forecast 2009-10 global soybean ending stocks at 54 million to 56 million tonnes, from an expected 49 million in 2008-09.

He had a similar outlook for canola, with increasing world production surpassing the expected rise in demand, taking global canola ending stocks to a potential new record above six million tonnes.

From a price standpoint, Basse said the large supplies, together with a lack of forward purchasing in the global markets, would keep oilseed values under pressure. However, he pointed to charts showing that soybean and canola futures prices are still expected to remain above historical averages.

Basse found support in the CBOT nearby futures at US$8.30 to US$8.50 per bushel, with resistance at $9.50 to $10 per bushel. He thought prices at harvest time could decline to harvest lows of $7 to $7.50 and added that it would take a considerable weather scare somewhere in the world to take prices above $10 per bushel.

For canola, Bas se expected the ICE new-crop futures would find support in the C$355-to C$375-per-tonne level.

But “the bull market in agriculture is far from over,” he said. He expects to see countries such as China and India to continue to show a strong import demand, especially heading into the last half of 2009. Basse also expects to see an increase in fund and investment money in agricultural commodities as the global economic outlook stabilizes.

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Phil Franz-Warkentin - MarketsFarm

Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.

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