Soybeans Top $17 for First Time on U.S. Exports Demand

(Businessweek) – Soybeans rallied to a record, surging above $17 a bushel, as the worst U.S. drought in half a century damaged crops and threatened to cut global inventories already eroded by last season’s dry weather in South America.

Prices at all-time highs will raise costs for importers including China, the world’s biggest buyer, and meat producers including Tyson Foods Inc. and Smithfield Foods Inc., which use soybean meal and grains in animal feed. Recent rains have failed to revive Midwest crops, with U.S. corn and soybean conditions rated the worst since 1988, while export demand for the oilseed remains robust, U.S. Department of Agriculture data show.

Crop prices have led gains this year on the Standard & Poor’s GSCI Index of 24 commodities, with corn soaring to a record $8.49 a bushel on Aug. 10 on the Chicago Board of Trade, while soybeans surged 41 percent. The rally spurred the biggest jump in global food prices since November 2009, according to the United Nations. The world food import bill will top $1 trillion for a third year this year, the UN said in May.

“We would expect at some point to see soybeans trade at $20 a bushel,” Chris Gadd, an analyst at Macquarie Group Ltd. in London, said today by telephone. “The devastation seen in South America earlier this year left soybeans very tightly supplied prior to the issues in the U.S. this summer.”

Soybeans for November delivery rose 1.7 percent to $17.1175 a bushel on the CBOT as of 1:09 p.m. London time, after touching $17.1275, an all-time high for the most-active contract. Soybean-meal futures for December delivery gained 1.7 percent to $521.60 per 2,000 pounds, after reaching a record $522.70.

World Supplies

World soybean stockpiles at the end of the 2011-12 season tumbled 26 percent from a year earlier to 51.9 million metric tons, as output plunged in Brazil and Argentina, according to the USDA. The agency expects inventories to rebound to 53.4 million tons in the upcoming season. Still, U.S. output may be hampered further as persistent dry weather spurs more farmers to abandon fields, Gadd said.

U.S. soybean export inspections jumped to 21.4 million bushels in the week ended Aug. 16, up 36 percent from a week earlier, USDA said yesterday. Soybeans are the fourth-largest global crop, after corn, rice and wheat.

In Ohio, the sixth-largest U.S. soybean-producing state last year, analysts on the annual Pro Farmer Midwest Crop Tour found soybean-pod counts that were about 18 percent lower than last year. The group estimated corn yields 29 percent smaller than last year, according to findings released yesterday.

South Dakota

In South Dakota, crop tour participants pegged yield potential for both crops at 47 percent lower than last year. The tour will take corn and soybean samples this week in Indiana, Illinois, Iowa, Nebraska and Minnesota.

Corn for December delivery rose 0.6 percent to $8.285 a bushel. Wheat futures gained 0.6 percent to $9.08 a bushel in Chicago. In Paris, November-delivery milling wheat climbed 1 percent to 265.50 euros ($329.88) a ton on NYSE Liffe.

About 23 percent of U.S. corn was rated good or excellent for a third straight week, unchanged from a week earlier, while 31 percent of soybeans received the top ratings, the USDA said yesterday. Both ratings were the lowest for the date since 1988. Areas of Iowa and Illinois, the largest corn and soybean growing states, had more than an inch (2.5 centimeters) of rain in the past week, after receiving less than half of normal moisture in the past two months, National Weather Service data show.

“The stabilization of crop conditions is providing a false sense of security,” Wayne Gordon, a strategist at UBS AG in New York, said in a report dated yesterday. Early harvest results show poor grain quality and quantity and “anecdotes suggest abandonment is higher than the USDA forecast,” he said, referring to corn.

The USDA on Aug. 10 cut its soybean production forecast to 2.69 billion bushels, the lowest since 2007, while the corn harvest was reduced to 10.779 billion bushels, a six-year low.

To contact the reporters on this story: Whitney McFerron in London at  wmcferron1@bloomberg.net; Phoebe Sedgman in Melbourne at  psedgman2@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at  ccarpenter2@bloomberg.net