Soaring prices of soyabean

Food inflation feared as soya prices soar

The price of soyabeans is heading towards the record high set during the 2007-08 food crisis, which is set to reignite fears of runaway global food inflation.

FT,

29 April, 2012

The surge in prices is because of falling global production levels following dry weather in Latin America and increased China imports.

Soya’s wide range of use as feed for cows, sheep, pigs and poultry – and as a source for oil used in foodstuffs such as biscuits and cakes – means its high price could trigger food inflation fears.

As one of China’s most important agricultural imports, soyabean prices are closely linked to Chinese inflation, which has eased from a peak of 6.5 per cent last summer to 3.6 per cent in March. Commodities traders said soyabean prices were likely to rise to $16-$17 a bushel, targeting the all-time high of $16.63 set in the summer of 2008.

“We are going to see much higher prices as it is becoming clearer that the Latin American harvest is sharply down,” said one senior executive with a leading trading house.

Soyabean prices have risen more than 10 per cent in the past month to hit a peak of $15.09 a bushel on Friday, the highest in four years. Other sources of edible oil, including rapeseed and canola, have also reached levels last seen during the 2007-08 food crisis.

Soyabean production is sharply down in the agricultural belt of Brazil, Argentina, Uruguay and Paraguay as the La Niña weather phenomenon has exposed fields to hot, dry weather over the past few months. Latin America accounts for about 55 per cent of global exports of the commodity. The US Department of Agriculture estimates that global soyabean production in the 2011-12 growing season will suffer its biggest annual drop in absolute terms since records began in 1965.

Alberto Weisser, chief executive of Bunge, one of the world’s largest agricultural trading houses, said that soya was the “tightest” agricultural commodity after a “shorter-than-expected” crop in Latin America.

“The market is sending a clear signal that farmers [elsewhere] need to plan more,” he told the Financial Times.

But US farmers, who supply 40 per cent of global soyabean exports, have indicated they will sow more acres with corn, and plan to slightly cut the amount of farmland for soyabeans.