South America Soybean Supply Increase make Soybean prices poised to extend decline

Soybean prices may be poised to extend declines as supply increases from South America and demand growth may slow from China, the largest consumer.

Soybeans have “room to fall” below $11.50 a bushel in the long term, said James Zhou, director of trading, Cargill Investment (China) Ltd. Prices are still relatively high, enough to sustain planting interest, so output may increase, Zhou said today at a conference in Guangzhou, China. Soybeans traded at $11.755 on Nov. 11.

Prices in Chicago have dropped 16 percent this year on larger crops in Brazil and Argentina, the biggest producers after the U.S., and concern the European debt crisis may curb global economic growth. Soybean imports may drop this year for the first time since 2004, the China National Grain & Oils Information Center said Nov. 11. Goldman Sachs Group Inc. last week reduced its forecast for soybeans on rising supplies.

China’s “huge demand” for commodities may have reached a “major turning point,” and the growth of imports in the next three-to-five years may slow along with its economic expansion, said Fei Zhonghai, vice president of COFCO Ltd.,the country’s largest grains trader.

Soybean prices may decline to $9 a bushel or even lower as “we are entering bearish phases of the price cycles for soybeans, soybean oil and soybean meal,” which may last one to two years, said Anne Frick, a senior oilseed analyst at Jefferies Bache LLC. The key bearish factor is the economy, as well as trade protectionism and changes in biofuel policies, Frick said at the conference.

Soybean oil may drop to 34 cents per pound and soybean meal may slump to $260 per ton, Frick said. Goldman Sachs lowered its soybean forecast to $12.20 a bushel during the next three months and to $12.50 in six months, down from $12.60 and $13.

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