Soybeans May Surge to Record $20, StanChart’s Reeve Forecasts

By Claire Leow and Susan Li

Aug. 24 (Bloomberg) -- Soybeans may rise to a record $20 a bushel, more than double today’s price, amid low stockpiles in the U.S., a weaker dollar and increased demand as the global economy recovers, according to Standard Chartered Plc.

“Historically, August is the most volatile time for beans because that’s the pod-setting period in the U.S.,” John Reeve, the bank’s director for agricultural commodities, said today, referring to the period that helps to determine final crop yields. “It’s a late crop this year,” he said.

The U.S. grows more than a third of the world’s soybeans and the country’s inventories are at a five-year low, according to Department of Agriculture data. Prices may swing between $8 a bushel and $20, Reeve said. The crop, crushed to make animal feed and cooking oil, touched a record $16.3675 a bushel in 2008.

“I am little bit more bullish than bearish” on soybeans, Reeve said in an interview. “An economic recovery, particularly in Asia, which of course is the majority market for exported beans out of the Americas, a lower dollar, all that macro stuff, given the tight stocks of beans in the U.S.” may boost prices.

Soybeans for December delivery, the most-active contract, climbed as high as $9.975 a bushel today on the Chicago Board of Trade. The contract is little changed this year, having risen about 1.4 percent.

Professional Farmers of America, an information company that produces crop estimates, said last week that the U.S. soybean harvest may be 3.15 billion bushels this year. That compares with a government estimate of 3.199 billion bushels.

‘Early Signs’

“There are some early signs that’s not going very well,” Reeve said, referring to the U.S. soybean crop. The focus for supply then shifts to South America, he said.

Argentina, suffering from drought, and Brazil are the largest producers after the U.S. The South American crop is planted in the fourth quarter, after the U.S. crop is harvested.

“We could see higher corn prices” should demand pick up amid the economic recovery and a weaker dollar, Reeve said. Still, “at this stage, the crop is looking very healthy, I think there’s a potential of lower corn prices.”

Corn prices in Chicago have dropped 19 percent this year and last traded at $3.29 a bushel. Pro Farmer forecast U.S. corn output at 12.807 billion bushels, more than the 12.761 billion estimated by the Department of Agriculture on Aug. 12.

“An interesting dynamic we’ve got at the moment is extremely high sugar prices and very low corn prices -- remember one of the substitutes for sugar is high-fructose corn syrup,” Reeve said. Sugar may advance on the potential for increased purchases by the Indian government, he said.

“Back in the last spike of the 70s, we had sugar at 66 cents a pound,” Reeve said. “Adjusted for inflation, that’s $1.70 a pound. Today, we’re in the low 20s, so the sky is the limit” for sugar, he said.

Sugar futures have jumped 85 percent this year, reaching a 28-year high of 23.33 cents a pound on Aug. 12 on speculation that adverse weather was reducing output in India and Brazil, the largest producers. The contract traded today at 21.84 cents.

India had its driest June in 83 years and parts of Brazil, the sugar largest grower, were hit by rainfall four times more than normal, hurting harvests. India is the biggest sugar user.

To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Susan Li at sli31@bloomberg.net