Strong Chinese demand will keep soybean markets bullish in 2017, despite record global supply and a slowdown in China’s economy, according to Rabobank.
“Soybean prices are forecast to rise in 2017, as global demand expands by 2 percent, underpinning markets,” forecasts Rabobank.
Soybean prices will stay above $10 per bushel, pushed up by China’s growing imports . Driven by the demand from its increasing hog herd size, China's soybean imports will increase by 5.5 percent in 2016/17 and by3.5 percent in 2017/18, the bank says.
The tightening in the balance sheet is expected to bring greater volatility to soybean prices throughout 2017, it notes.
The continued strong demand will offset a record global supply of 330 MT, it says. Even though a recovery is expected in South American production, Argentina is likely to see only a moderate recovery in soybean production, it notes.
Although the rise in soybean prices should help farmers, the global grain glut will push down revenue from other commodities, according to the bank.
“The oversupply of grains remains an ongoing issue, as record-large global stock levels will keep prices under pressure … and this will continue to challenge producers’ revenues,” it observes.
Large global corn supply is seen keep Chicago corn range-bound between $3.40 and $3.55 in 2017, the bank says.
However, global consumption of corn is seen rising 3 percent to a record 1 billion tons, and in the U.S., domestic use will rise 5 percent, driven by ethanol production, it says
Chicago wheat will also say in a range of $4.15 to $4.60 in 2017, the bank predicts.
“Record 2016/17 global wheat stocks continue to weigh on the market … with stocks building in every major exporting region except the European Union,” it says.
The bank forecasts 2017-2018 wheat production t at 727 MT, some 2 percent higher than the five- year average.
With another bumper global wheat harvest and a swelling availability of stocks for export, supply will continue to weigh on prices, even though U.S. wheat production will fall below 2 billion bushels for the first time in five years, the bank says.