February 24, 2004

US Soybean Futures Soar To 15-Year High On Falling Supplies From Brazil, Argentina

Soybean futures in Chicago soared to their highest price in more than 15 years amid speculations of dwindling Brazilian and Argentine soy crops as a result of hot, dry weather conditions.

Poor growing conditions may mean smaller crops at a time when U.S. inventories are expected to fall to a 27-year low. Brazil's soybean production may fall as much as 11 percent and the crop in Argentina may be 7 percent smaller because of hot dry weather expected over the next two weeks, said Dan Basse, president of AgResource Co. in Chicago.

A smaller harvest from South America "increases the importance for a good U.S. crop this year," Basse said in an interview. U.S. farmers, the world's largest soybean growers, will start planting crops in June and will harvest by October.

Soybeans for May delivery rose 23.5 cents, or 2.7 percent, to $9.07 a bushel at 11:35 a.m. on the Chicago Board of Trade, after earlier rising to $9.10, the highest prices since July 1988. Soybeans have surged 59 percent in the past year as global crops were hit by drought and China expanded imports.

Global soybean production this year had been expected to be a record 199.7 million metric tons, up 1.5 percent from 2003, the U.S. Department of Agriculture said earlier this month. Brazil was forecast to produce 61 million metric tons and Argentina was expected to harvest 36.5 million tons.

Brazilian Agriculture Minister Roberto Rodrigues said last week that the country's soybean production probably will reach 58 million tons, less than the U.S. had forecast though still a record.

A smaller crop from Brazil "means more competition for declining U.S. supplies," said David Bauer, president of Brite Futures Inc. in Milwaukee, Wisconsin. "Export sales and U.S. crushings are not slowing."

The gain in soybean prices was limited by concern that outbreaks of bird flu this month at chicken farms in four states will reduce demand for soy-based animal feed, Basse said.

Chickens on a farm in Texas tested positive for a more virulent strain of bird flu than was reported last week and are the first such U.S. case in about two decades, government officials said.