Soybean prices are likely to rise further in the next few months due to a drought in South America and a decline in global output this year, a senior industry analyst said.

Soybean prices are likely to average $550 a metric ton on a delivered basis in Rotterdam during the March-June period, up from $520-$530/ton in February and $509/ton in January, Siegfried Falk, co-editor of Hamburg-based journal Oil World, said late Monday.

"We haven't seen the peak yet in soybean prices. There is still a potential for increase," Falk said.

Brazil and Argentina are among the world's biggest soybean and soymeal exporters. Following a smaller U.S crop in 2011, buyers have become more dependent on the South American harvest that is scheduled to begin in the coming weeks.

Falk said Argentina is likely to export around 7.7 million tons of soybeans during the six months ending August 31, up 15% on year. Argentine production, on the other hand, will likely fall 4% this year to 47 million tons, dragging down overall stock levels, he said.

Soybean production in Brazil is also forecast to fall from last year's record 75 million tons to 68 million tons in 2012, Falk said.

The potential losses are significant, given that in mid-September, ahead of the planting season, Oil World was expecting Brazil's 2012 soybean production to hit 73 million tons and Argentina's 53 million tons.

The recent rains may be of some help for Argentina's crop but were too late for the soybean harvest in Paraguay, another important exporting country, he said.

With global production forecast to fall by 19 million tons to 246.5 million tons in the 2011-12 marketing year, a smaller South American crop is clearly a supportive factor for prices, Falk said.

The fall in soybean production can't be considered in isolation when the global rapeseed supply is also tight, he said.

This will push up prices which in turn could encourage higher soybean plantings in the U.S during April-May. If the weather turn out favorable, a good U.S crop later this year can offset some of the impact of production losses in South America.

That, however, is not a done deal as there will be competition for acreage between corn and soybean and it will be tough for soybeans to get additional acreage when corn prices are also high, Falk said. "Due to lower inventories, the world currently needs a large crop of both corn and soybeans, which is hard to accomplish."

-By Sameer Mohindru, Dow Jones Newswires; +(65) 6415-4085; sameer.mohindru@dowjones.com

(END) Dow Jones Newswires

March 13, 2012 02:46 ET (06:46 GMT)