Soybean futures jumped in early deals after the US cut its production estimate by considerably more than the market had expected, signalling a squeeze on supplies which looks set to have global repercussions.
The US Department of Agriculture cut its estimate for the US soybean yield this year by 2.0 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 73.8m 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.
‘Rationing needs to occur’
The data implied a US crop of 3.06bn bushels (83.2m tonnes), nearly 130m bushels short of trade expectations, and signalling that prices would rise to slow demand accordingly.
USDA US soybean data, diff. from last, and from (market forecast)
Harvested area: 73.8m hectares, -0.5m acres
Yield: 41.4 bushels per acre, -2.0 bushels per acre, (-1.4 bushels per acre)
Production: 3.06bn bushels, -169m bushels, (-131m bushels)
Year-end stocks: 3.15bn bushels, -118m bushels
Estimates for 2011-12. Market estimates from ThomsonReuters
"Rationing needs to occur on soybeans," US Commodities said.
Farmers could expect to receive up to a record $14.50 a bushel for their soybeans in 2011-12, up $0.50 a bushel from the previous upper estimate, the USDA said.
In Chicago, soybeans for November, the best traded contract delivery soared more than 4% in early deals before easing to $13.34 ½ a bushel at 17:30 GMT, up 2.5% on the day.
‘Going to affect China’
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.
Selected USDA soybean forecasts, change on last, and (year on year)
Brazilian production: 73.5m tonnes, +1.0m tonnes, (-2.6%)
Brazilian exports: 36.5m tonnes, +2.5m tonnes, (+22%)
Chinese production: 14.0m tonnes, -0.3m tonnes, (-7.3%)
World production: 257.5m tonnes, -4.0m tonnes, (-2.5%)
Year-end stocks to use ratio: 23.2%, (-0.4 percentage points), -3.8 percent points
Estimates for 2011-12
However, importers are to take a bigger hit, with the forecast for soybean exports from the US –the world’s biggest shipper – downgraded by 95m bushels to 1.40bn bushels (38.1m 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," Sal Gilbertie, head of Teucrium Trading, told Agrimoney.com.
"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 soybean importers rising by nearly one-quarter in July, from June.
"China is going to feel the impact of the tighter soybean supplies."