Forward cover offers comfort to soybean stocks

Related tags Palm oil Goldman sachs Soybean

Global stocks of soybeans continue to rise after last year's price
spiking draw-down, with oilseed production for 2004-05 projected to
reach 390.2 million tonnes, providing a 'comfort-zone' for
inventory levels.

The world stocks-to-use ratio rose this month by about three per cent to 115 days of forward cover, according to new figures from the US department of agriculture.

Soybeans represent the starting point for a range of food ingredients - oil, proteins, isoflavones, even milk; products that are enjoying growing popularity on the back of consumer demand for health-positioned food products.

This small increase in ratio will contribute to less price volatility for soy, that witnessed 15 year highs in recent years.

Investment bank Goldman Sachs predicts the high inventory levels will limit any 'upside price' for soybeans in the near term, despite indications that production may suffer over the next few years.

The bank cites the recently discovery of soy rust in the US, and early indications that the Brazilian 2005/2006 crop may fail expectations, as vulnerabilities to global production.

"However, the record high level of global soybean stocks suggests it would take several years of bad harvests to run down inventories to the point where prices would be significantly pressured to the upside,"​ says Goldman Sachs.

Soy oil and palm oil are, currently, the two most popular vegetable oils on the global food market. Palm oil, second only to soybean oil in terms of global demand, accounts for 28 per cent of total edible oil sales.

One of their major appeals is price. In the US soy oil is trading at about $470 ton, and palm oil at $340 a ton. These figures are significantly below the $690 and $666 a ton currently demanded by sunflower and rape seed oil respectively.

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