By Joanna Newman
US soya bean prices are on a collision course for disaster, unless there is a drought this summer to cut back yields significantly.
The latest US Department of Agriculture (USDA) supply and demand report has confirmed that inventories have more than doubled at the start of the 1999/2000 season to 430 million bushels from 200 million a year ago.
This will swell further to 595 million bushels at the end of the 1999/2000 period.
The outlook for crop yields is positive so far. Weather patterns for the newly planted soya bean fields are favourable, with cool, wet conditions in the Midwest. 69% of the emerging soya beans are rated good to excellent by USDA.
The price guarantees of the federal farm programme have encouraged farmers to plant more unwanted soya beans at the expense of other grains.
The subsidies are now discouraging farmers from selling their bean stocks, creating an overhang in the marketplace.
Export demand is sluggish with the USA struggling to compete with South America, which is aggressively marketing its own record soya bean output.
Meanwhile domestic crushing demand is hindered by the collapse in soya oil prices.
The Chicago July soya oil contract has been dragged to the lowest point since 1987 by weaker Asian vegoil values, trading at 16.9¢ on Tuesday (15 June) down from 17.2¢ last week.
In the absence of any positive news, the Chicago July soya bean contract has fallen to 463.3¢/bushel on Tuesday, 15 June from 469.0¢ a week earlier.