Inflation fear raised as UN agency cuts soybean output

Thu May 3, 2012 4:16pm GMT

By Svetlana Kovalyova

MILAN (Reuters) - World output of key animal feed ingredient soybeans is set to tumble in 2011/12, with prices poised for fresh highs, the United Nations food agency said, showing the resilience of inflation trends fanned by three months of rising food costs.

Record high food prices in February last year helped fuel the Arab Spring uprisings in the Middle East and North Africa. Prices receded in the second half of 2011 but the uptrend resumed in January.

The UN's Food and Agriculture Organisation (FAO) said on Thursday its Food Price Index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, fell to an average 214 points in April, from a revised 217 in March.

Yet soybean prices - already at their highest since July 2008 - are likely to rise further due to tight supplies, driving corn prices higher, the agency's senior economist said.

World soybean output is estimated to drop 9.5 percent to 240 million tonnes in the 2011/12 year, one of the steepest year-on-year falls on record, hit by poor crops in the United States and South America, the FAO said.

The likelihood that soybeans would have to compete for cropland with maize, especially in the United States, in 2012/13 adds further support to prices, it said.

"We think that the soybean price, reflecting the tightness of the market, has the potential to increase, so there is now a lot of attention to 2012/13 planting intentions," the FAO's senior economist and grain analyst Abdolreza Abbassian told Reuters.

The rise has been driven by Chinese demand and poor yields in key exporter Argentina, after dry weather linked to the La Nina weather phenomenon.   Continued...

Women sell vegetables and fruits on the roadside in Nairobi, Kenya, June 19, 2008. REUTERS/Antony Njuguna
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