Soybeans Rise as U.S. Predicts Plunging Inventory in 2013

By Jeff Wilson - May 11, 2012
Bloomberg
Soybeans rose the most in more than two weeks after the U.S. forecast a 31 percent plunge in domestic inventories next year, as drought damage in South America boosts demand for supplies from the Midwest.

Reserves will drop to 145 million bushels (3.94 million metric tons) on Aug. 31, 2013, from an estimated 210 million this year, the U.S.
Department of Agriculture said today in a report. The average estimate of analysts surveyed by Bloomberg was 172 million bushels. U.S. exports will jump 14 percent to make up for smaller crops in Brazil and Argentina this year and rising global demand, the USDA said.

“U.S. carryover is already projected to be very small, and that means South America will have to harvest big crops to prevent a bigger global shortage from developing,” Bill Gentry, a broker at Risk Management Commodities Inc. in Lafayette, Indiana, said in a telephone interview. “We will need to see increased export demand to keep this rally going.”

Soybean futures for July delivery advanced 1.7 percent to close at $14.5525 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest gain since April 20. The oilseed has rallied 20 percent this year.

Reduced soybean supplies in the U.S., the world’s largest grower and exporter last year, may raise feed costs for meat producers including Tyson Foods Inc. (TSN) and Smithfield Foods Inc. (SFD) Craig Huss, the chief risk officer at Decatur, Illinois-based Archer Daniels Midland Co., the world’s largest grain processor, said May 1 that reduced South American exports would make it “difficult to buy beans going forward.”

South America

Combined production in Brazil and Argentina will fall to 107.5 million metric tons in the marketing year that ends Sept. 30, from 111 million forecast in April and 124.5 million a year earlier, the USDA said. Output will rise to 133 million next season, the agency said in its first forecast of the crops.

Estimated global production in the marketing year that begins Oct. 1 will rise to 271.42 million metric tons, from a revised 236.87 million tons this year, the USDA said in today’s report.

World consumption is forecast at 265.14 million tons next year, up from a record 254.14 million forecast this year.

Reserves before the 2013 Northern Hemisphere harvest will rise to 58.07 million tons, up from 53.24 million this year, the lowest in three years, the USDA said. Eighteen analysts surveyed by Bloomberg News expected 58.24 million, on average.

Soybeans are the second-largest U.S. crop, valued at $35.8 billion in 2011, behind corn, government data show.