Supplies of soy, which are processed into other products used for animal feed and in packaged foods, are tight due to robust global demand and recent droughts in other large producing nations. The US is the world's No. 1 grower of soy.

CBOT soy for July delivery on Thursday (July 8) rose 2% at US$10.125 a bushel, a six-month high for a nearby contract. While the July contract represents soy harvested last autumn, the November price reflects crops currently growing and also settled higher, at US$9.46 a bushel.

Government data to be released Friday (July 9) are expected to further clarify the supply picture. Industry participants anticipate that the USDA will confirm that soy supplies are tight. Inventories from the 2009-10 crop year, which ends August 31, are expected to be revised downward to 354 million bushels, a 1.7% drop from last month's estimate.

As those inventories get whittled down, analysts say expectations for the approaching 2010-11 crop may be too high. Farmers planted a record 78.8 million acres of soy this year, according to the USDA. However, stormy and wet June weather conditions in the Midwest may have delayed plantings or drowned out some seeded fields.

"You have to assume that the USDA's acreage number will have to come down near 78.3 million, with June wetness not allowing all the acres to get seeded," said Bill Nelson, an analyst with Doane Advisory Service in St. Louis.

A big concern is how the rainy weather will affect yields, especially as the critical growing period for US soy approaches in August. The month is a critical time for soy because that when the plant sets pods and the beans within them grow, ultimately determining the yield.

"Weather and yields will have a much bigger impact on price than acres," said Steve Freed, a market analyst with ADM Investor Services in Chicago.

Market participants are already concerned about the production potential because the government's crop ratings slipped this week. The USDA said 66% of the soy crop was in either good or excellent condition as of Sunday (July 4), down one percentage point from the prior week. Declining ratings can signal that weather or pests are damaging the health of the plants, reducing their yield.

Record soy harvests in Brazil, the world's No. 2 producer, are doing little to dampen the bullish mood. The South American crop is slow in coming to market, so export demand for US soy remains robust, with a 116,000-tonnes sale to China announced on Thursday (July 8).