August 12, 2011


US soy futures jump after extreme heat dries crop



US soy futures soared in early deals after the US cut its output estimate by considerably more than the market had expected, signalling a squeeze on stocks which looks set to have global repercussions.


The USDA cut its estimate for the US soy yield this year by two bushels per acre to 41.4 bushels per acre - a downgrade twice as big as analysts had expected.


Furthermore, it reduced its estimate for harvested acres by 500,000 acres to a four-year low of 73.8 million acres, reflecting a trim to estimates for sowings, after a rain-hampered spring planting season, and damage caused by heat to crops in Texas and Oklahoma.


"The early wetness and then the blowtorch heat took a toll," broker US Commodities said.


The data implied a US crop of 3.06 billion bushels (83.2 million tonnes), nearly 130 million bushels short of trade expectations, and signalling that prices would rise to slow demand accordingly.


"Rationing needs to occur on soybeans," US Commodities said.


Farmers could expect to receive up to a record US$14.50 a bushel for their soy in 2011-12, up US$0.50 a bushel from the previous upper estimate, the USDA said.


In Chicago, soy for November, the best traded contract delivery soared more than 4% in early deals before easing to US$13.34 a bushel at 17:30 GMT, up 2.5% on the day.


The USDA foresaw the reduction in supplies being felt in part by domestic crushers, who looked set for a second successive season of reduced activity in 2011-12.


However, importers are to take a bigger hit, with the forecast for soy exports from the US, the world's biggest shipper - downgraded by 95 million bushels to 1.40 billion bushels (38.1 million tonnes).


Although prospects for exports from Brazil looked brighter, buyers, including top-ranked importer China, faced paying up for supplies, analysts said.


"It is going to affect China the most," said Sal Gilbertie, head of Teucrium Trading. "China has been importing quite a few soybeans again, to feed its growing hog herd and meet consumers' growing demand for protein."


Date on Wednesday showed China's soy importers rising by nearly one-quarter in July, from June.


"China is going to feel the impact of the tighter soybean supplies."

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