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Oilseeds May Rise as Production, Stockpiles Fall, Oil World Says

Oilseed prices may surge as soybean production falls on dry weather in South America, palm oil output slows and rapeseed stockpiles decline, Hamburg-based researcher Oil World said.

Global oilseed output is expected to fall by 11 million metric tons, leading to a 14 million ton shortage in 2011-12, Oil World said in a report today. Stockpiles will fall as consumption outpaces production, the researcher said. Soybean output in Brazil, the world’s biggest shipper, will fall to 68 million tons, down 9.7 percent from a year ago.

“Even if we assume a considerable slowing-down of the demand growth, there will still be a massive global oilseed production deficit,” Oil World said. “This will result in a corresponding decline of stocks and requires a substantial increase in world production next season. It could create nervousness and high price volatility as long as the supply uncertainty persists in the Northern Hemisphere.”

The 2011-12 crop year will be the first season when world production of soybeans and rapeseed decline simultaneously, Oil World said. Sunseed and cottonseed crops are expected to reach records, the researcher said.

Strikes at Argentinian ports may disrupt shipments from the South American country, limiting available supplies, according to the report. A national port-worker strike is expected to start tomorrow, following some action on March 1. Truck drivers may go on strike this month and farmer unions have announced strike actions, Oil World said.

“Truck drivers will reportedly launch a nationwide strike from mid-March onward to enforce a solution to their previous calls for increased freight rates for carrying soybeans and grains,” the researcher said. “The four major farmer unions have announced that various strike actions will be taken by their members to protest against government policies as well as the lack of financial support for farmers who severely suffered from the drought damage in December and January.”

To contact the reporter on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.

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