By Joanna Newman

AFTER three straight weeks of daily losses, soya bean prices have finally managed to inch upwards over the past couple of days.

However, the modest 2.5% gain this week is dwarfed by this years market declines which have dragged soya beans to a 23-year low.

The Chicago March futures contract, which touched 600¢/bushel in December, hit a low of 450¢ last Friday before closing on Tuesday (2 March), at 462.5¢/bushel.

Several factors helped turn soya beans around, including rumours that China may re-enter the market to buy beans and a belief that the sell-off in beans has been overdone.

However, the fundamentals for the soya bean market will continue to deteriorate over the next year.

The imminent harvest in Brazil and Argentina will likely set new records, although there is some talk of lack of moisture in areas of Argentina which could damage late growth.

Continuing weakness in the Brazilian currency will add to that countrys export competitiveness at the expense of the USA.

Against this backdrop, US farmers will actually raise their soya bean acreage this spring because of advantageous Loan Deficiency Payment (LDP) subsidies from the federal government.

As President Clinton asks Congress for another US$1.1 billion (£683m) in farm loan subsidies this week, the worsening crisis in soya beans is fuelling an urgent debate about US farming legislation.

US farmers received LDP payments on 60% of their 1998 bean crop and under the programme, this grain remains in private hands for sale on the open market.

As of January farmers still owned 253 million bushels of beans under loan and this overhang of unsold inventory is adding to pressure on the market.

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