Our US team has raised forecast for grains (i.e. corn, wheat, and soybean). Soybean price raised by 7% for 2010E and 14% for 2011E. Overall, more constructive on the outlook for soybeanm (neutral to bullish now) and we stay bullish on outlook for soybean oil. Positive spill over for palm oil.
The export ban on wheat in Russia was recently extended to next year from year-end. This will result in higher demand for substutites, corn and soybean meal. Also, EU production of rape seed is coming in below expectations due to weather issues or for the first time in many years showing a drop in output next year. Both soybean oil and palm oil are close substitutes of rapeseed oil. There are also concerns that the La Nina (wet weather in Asia, drought in the Americas) may translate to downside risk in soybean production during the South American planting and harvesting by year end and into early next year. As we head into 2011, our US team remains bullish on soybean oil price outlook on the back of the biofuel mandates under RFS 2.
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