December 9, 2003



Soy Shortage in US Forecast For Next Summer


The specter of a shortage of U.S. soy next summer has boosted deferred CBOT soybean futures prices this week compared with nearbys, analysts said.


And many CBOT soy brokers expect that trend to continue, as strong export sales and domestic use this fall have drawn down drought-limited supplies,


CBOT soybean futures for delivery in July settled last Friday at $7.33-1/2 per bushel, up 11-1/2 cents from last Friday's close, while front-month January ended at $7.60-1/2, up just 1-3/4 cents on the week.


"The market sees the real tight spot here in the U.S. next summer, not right now," said Tom Pfendler, soy broker at Goldenberg Hehmeyer. "Right now, the bean pipeline is pretty well supplied."


"The funds widened the (January/July soybean) spread out too far, and are liquidating now," one cash-connected CBOT trader told Reuters on Friday. "And the cash market is saying sell now, do not wait until later. So the (January/July) spread is crashing."


The U.S. soy industry faces the unusual situation this year of trying to meet rising global soy demand with smaller supplies after two years of sub-par U.S. harvests.


Since September 1, the beginning of the 2003/04 marketing year, U.S soybean export sales have already totaled 78% of the total 890 million bushels forecast for the entire year, according to the USDA.


China, the top U.S. soy customer, has shipped and committed to record U.S. soy purchases this fall, while a weak U.S. dollar has attracted solid European business, traders noted.


"With 39 weeks to go in the year, in theory, sales need average only 5 million bushels per week to get to the forecast," said Bill Nelson, analyst at AG Edwards & Sons.


At the same time, domestic soybean crush has exceeded last year's pace, with 272.5 million bushels crushed during the first two months of the year versus last year's 271.8 million bushels, according to the U.S. Census Bureau.


The strong usage is prompting estimates of a rally next spring or summer to 7-year highs, following this fall's rally to a six-year top.


"I think the (CBOT) July (soybean contract) and possibly the May have the potential to get well over $8.00 per bushel if all this business we have on the books with China gets shipped, and if they come back for any additional supplies," Pfendler said.


The nearby CBOT soybean futures contract hit a high of $9.03-1/2 on May 7, 1997.


"It all depends on the South American crop now," one CBOT trader said on Friday. "If there are any weather problems there, the back months could gain more."


South American soy farmers have planted the majority of this winter's projected record 98 million-ton crop, and recent good rains bode well for early plant growth, they said.

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