Macquarie Sees Crops Extending Rallies on Tighter Supply

Soybeans and corn may extend rallies as supplies tighten following droughts in the U.S. and South America, while demand for oilseeds is most robust, said Macquarie Group Ltd.

Soybeans may jump to an average of $19 a bushel in 2013’s first quarter before dropping to $17.50 in the following two periods, the bank said today in a report. Corn may average $7.75 in the first quarter, $8.50 in the three months after that and $8.75 in the third quarter before sliding to $5 in next year’s last quarter, it said.

Brazil’s ability to increase exports may be limited by logistical inefficiencies, which are likely to create “large backlogs of boats” as local crops come to harvest, London-based analyst Chris Gadd said today on a conference call. The U.S. Department of Agriculture predicts Brazil will surpass the U.S. in the 2012-13 season as the world’s biggest soybean exporter, after crops recover from the past year’s drought.

“By far we feel that soybeans are the most bullish component of the grains and oilseeds complex,” Gadd said. “The impact of drought in the U.S. is far more material for soybeans than corn because we’ve seen loss of production already this year in South America, and we’re seeing poor production in other oilseeds” including sunflower seeds in the former Soviet Union and rapeseed in Europe, he said.

Corn, Wheat

Soybeans rose to a record $17.89 a bushel on Sept. 4 on the Chicago Board of Trade and are up 44 percent this year. Corn touched an all-time high of $8.49 a bushel last month.

Wheat may average $9.25 a bushel in the first two quarters of 2013 before dropping to $8.75 in the following three months and $6 in the fourth quarter, Macquarie said. The grain traded at $8.7525 a bushel today in Chicago, up 34 percent this year. It will “remain in lockstep with the fortunes of corn” because both are used in feed, Gadd said.

Wheat traded on NYSE Liffe in Paris may gain relative to Chicago grain because of tightening supplies in Russia and Europe, Gadd said. Dry weather spurred Russia today to cut its wheat-harvest outlook to 40 million metric tons, less than the country produced in 2010, when the worst drought in 50 years spurred a 10-month ban on cereal exports. Russia has said it plans no restrictions on shipments this year.

“Production problems in wheat have been locational issues, rather than global problems,” Gadd said. “We’ve seen poor crops in both the FSU and Europe, and that will mean they can’t supply all the needs of North Africa and the Middle East. At some point in the season, Europe and the FSU will be priced out of those markets.”

To contact the reporter on this story: Whitney McFerron in London at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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