By Andrew Jones

  Of DOW JONES NEWSWIRES


  SINGAPORE (Dow Jones)--Despite near record-low global inventories now, the
soybean market may be facing a supply glut of around 19 million tons above
world consumption forecasts by early next year - a scenario that could drag
prices lower in the months ahead, a senior agricultural commodities consultant
said Thursday.

  A surge in imports to China in recent months and one of the worst droughts in
South America in 50 years has drawn global soybean inventories to unprecedented
lows, with U.S. stocks below three million tons, which equates to around 13
days supply, said John Baize, president of U.S.-based consultancy firm, John C.
Baize and Associates.

  But a combination of increased plantings in South America - last year's
drought will likely mean an increase in soybean acreage as it's a cheaper crop
to grow - and expectations of a near-record U.S. harvest this year will likely
lead to a surge in output by April 2010, he said.

  "The U.S. Department of Agriculture is forecasting a near record U.S. crop -
around 88 million tons - while Brazil, Argentina and Paraguay between them
could produce more than 120 million tons. We could be looking at an oversupply
of more than 19 million tons above what the USDA is forecasting global
consumption to be at next year - that's not good news for prices."

   Oversupply May Drag Prices Lower


  Chicago Board of Trade soybean futures spiked through July on a combination
of factors: Robust buying by the world's largest consumer, China, which in the
first half of this year imported more than 26 million tons - a 28% on-year rise
- the drought in South America and tight U.S. ending stocks.

  CBOT's November contract rose more than 17% from early July to reach an
August peak of $10.66/bushel, though at 0710 GMT Friday the contract was
trading at $9.40/bushel.

  "Farmers who are selling soybeans now at $10.00-$11.00/bushel, by April could
be glad to be getting $8.00l; they could even be getting less," said Baize.

  In the near term the industry is also monitoring the development of an El
Nino weather pattern, which could result in increased rainfall in South
America, which would likely benefit soybean crops there, though an El
Nino-related drought in Asia could hit palm oil output, which in turn would
increase demand for soyoil, he said.

  In the longer-term surging demand from Asia that has seen China's soybean
consumption rise from one million tons in 1991 to 32 million tons now is
unlikely to let up, he added.   "You have rising populations, rising wages and
changes to dietary trends that are fueling huge demand in animal feed."

  "China's soybean acreage is declining by around 5%-7% annually as more
farmers switch to corn. The potential to increase corn yields is much higher
(as research is producing new, hardier types of corn, and the yield-to-acreage
ratio of corn is more favorable) and as such it is a more attractive crop to
grow, which means China's dependence on soybean imports is unlikely to change,"
he said.