A sharp drop in demand for US soyabeans will erode the long-held price premium of old-crop Chicago Board of Trade soyabean contracts, as dominant buyer China turns to abundant new-crop South American supplies, traders and analysts said on Wednesday.
For months, old-crop CBOT contracts based on already harvested supplies have been priced at a huge premium to the benchmark new-crop delivery for November 2015, putting the CBOT soybean price structure has been at an inverse.
China's voracious appetite for US soybeans since last fall's harvest caused domestic processors to bid up to keep the US crush at a record pace to meet soyameal export sales.
But the premium of old-crop July over new-crop November, a popular spread trade, is fading fast as China has been buying cheaper Brazilian and Argentine soyabeans as harvest ramps up.
"We are probably in a bear market. If that's the case, the July should lose relative to the November," said Anne Frick, oilseed analyst with Jefferies Bache in New York.
On average, analysts expect USDA to trim its 2014/15 end-stocks forecast by 15 million bushels to 370 million given record US exports and crush since September 1. That would still be four times the amount left at the end of the 2013/14 season.
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