Soybeans have been the star of commodity markets for months, but price pressure might be on the way.
"The Chicago Board of Trade is overvalued," says Thomas Mielke of Oil World, an independent forecasting service for oilseeds, oils and metals. "Global production is bearish. Prices of $13 per bushel are not justified."
South America will produce a record soybean crop of 155 million metric tons (MT) in 2013/14, up 10 million MT from 2012/13, Mielke says. Prices are still strong because of logistical challenges in Brazil and Argentina.
While the U.S. is a major exporter, Mielke points out that as a whole, the U.S. is a net importer of fats and oils. It has even imported soybean oil from Argentina, he says.
The outlook for soybean oil is positive. Mielke explains that demand for biodiesel is increasing with a growing host of countries implementing plans to increase its use. "This is quite a change," he says. Brazil and Indonesia have announced major biodiesel projects. "It’s likely that Brazil will have a 7% biodiesel mandate," Mielke says. Additionally, Argentina exports biodiesel to Africa and Iran because it’s economical to use, he explains.
As a result, while he believes soybean futures are overvalued, soy oil futures are undervalued.
"The growth of biodiesel will have an effect on price," he says. Because oil can’t be produced without also producing meal, he expects weaker meal prices and higher soybean oil prices.