Soybean Price Boom Fueled by Biodiesel

John Davis

Analysts believe soybean prices could rise to all-time highs in 2008 as demand for beans as feedstocks for biodiesel and foodstocks for the Chinese take center stage.

This analysis from Reuters says China’s production and irrigation problems are just part of the increased demand for the U.S. crop that, in previous years, had lost ground to corn going to ethanol:

Throw in biofuels demand — specifically, biodiesel made from soyoil — and the soy market has a second wild card of possibly unlimited demand. Another factor is the sinking dollar, which is making dollar-based soybeans cheaper for export.

cbot.jpgMany analysts see CBOT soybeans rising to $12 a bushel by early next year, with the potential to test the all-time high of $12.90 posted in June 1973.

On Wednesday, spot-month January closed 5-3/4 cents higher at $10.96-3/4 per bushel.

It is likely that CBOT soyoil will test its record top of 51 cents a lb notched 33 years ago, especially if crude oil — a market that soyoil mirrors given the expanding biodiesel industry — continues its rally.

Chicago Board of Trade January soyoil closed at at 46.58 cents a lb on Wednesday. Traders are concerned about how much of the soybean crop will go to food and how much will go to fuel.