A startling rally in soybean prices this year could reach record highs if dry weather doesn't improve for South American farmers.
"Fundamentally we have no room for weather issues, and we are getting those weather issues," Alex Sanfeliu, head of Cargill's World Trading Group, said in a telephone interview. "We are in an environment where I think beans — if the end of the crop weather pans out as expected — have the chance to reach all-time highs."
Minnetonka-based Cargill is one of the world's largest agricultural traders.
Futures in Chicago have soared more than 20% this year to the highest level since May. The all-time high for a most-active contract was $17.89 a bushel, set in 2012.
Drought hit South American soybean fields in the heart of its growing season, with Brazil's Conab agency on Thursday slashing its estimate for the coming harvest to a three-year low. That adds to shortfalls of oilseeds worldwide from palm to canola.
Cargill estimates that between Brazil, Argentina and Paraguay, a total of 27 million to 28 million tons of soybeans have been lost due to bad weather.
"Prices will have to continue to go higher to reduce demand, bring supply out from reserves in China and bring additional acreage for next year," Sanfeliu said.
Additional soybean exports from the U.S. are likely this year, he added, noting that Cargill's estimates for carry-out stocks from the country were "significantly lower" than estimates from the U.S. Department of Agriculture.
