September 24, 2003

 

 

U.S. Soybean Lifted On China Export, Low Yields

 

U.S. soybean futures rose to a five-year high on the back of two factors - a reported sales of the oilseed to China, and a USDA estimate which cut crop production back by 7.7 percent.

 

Expectations are that this year's harvest of soybean, which is the U.S.'s second most important crop, will be the smallest since 1996. This in contrast to the near-record harvest predicted two months ago.

Higher soybean prices, which is used to make cooking oil and animal feed, will incur add-on costs for American processors such as Archer Daniels Midland Co. and meat producers such as Tyson Foods Inc.

The recent sale of 165,000 tones of soybeans to China, its biggest export market for the oilseed, also boosted prices. Chinese customs had last month refrained from issuing permits to U.S. ships carrying soybeans, leaving the cargo in a lurch and provoking threats of complains by the U.S. to the world trade governing body, the World Trade Organisation. Now that exports are back on track, the promise is of a smoother journey for U.S. grown soybeans to the Chinese market.

 

As the dry climate continues in key growing areas, USDA estimates for soybean production went down 3.2 percent from last year's harvest of 2.72 billion bushels to 3.2 percent for this years'.

 

As of Sept. 7, about 26 percent of the nation's soybean crop was in poor or very poor condition, an Agriculture Department report Monday showed, which is an increase of about 8 percent for the week that ended July 20. Market analysts say that this spells bad news for farmers, because despite price rises, retail prices of crops will remain unaffected, so farmers will be on the losing end with the lower output.