Near-month soybeans futures for May delivery on the Chicago Board of Trade rose above $14.70 a bushel Wednesday, the first time since September 2008, as investors took long positions expecting tighter supply in the coming months.

The contract hit a 43-month high of $14.7175 in electronic trade during the Asian day. At 0625 GMT, the contract was trading 8.25 cents higher at $14.6950.

Among factors boosting demand was the fear that soybean production in drought-hit Brazil and Argentina could fall even below the already conservative estimates made earlier, a Singapore-based commodities analyst said.

The latest concern is about a possible frost, and maybe even freezing temperatures in Argentina, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative. Speculators are lapping up old crop contracts fearing that supply may tighten further, he said.

Reflecting the fear of tightening supply, CBOT May soybeans futures' premium to the November contract has widened significantly to around 114 cents a bushel, compared with just 16 cents in end-February. The November contract represents the next U.S. harvest, which will be available for exports towards the end of the year.

Earlier this month, the London-based International Grains Council revised down its forecast for South America's 2012 soybean output by 4.4 million metric tons to 119.5 million tons, a decline of 12% on year. It revised down the production estimate for all three major soybean producing countries in South America --Brazil, Argentina and Paraguay.

The estimates will be updated again Thursday.

There have been aggressive sales by Brazil and Argentina in the last six months but inventories are now depleting, said a Tokyo-based trading executive.

That will raise demand for the U.S new crop which will hit the market from September. U.S production fell 8% in 2011 to 83 million tons according to government estimates. Preliminary forecasts showed plantings would fall 1% to around 30 million hectares this year.

The back-to-back fall in production in both the U.S. and South America which together control more than 90% of the global trade in the commodity, and reports that U.S. growers may shift acreage to corn this year have added fuel to a market that is already on fire.

Asian buyers continue to snap up soybean cargoes but are benchmarking their purchases against CBOT's November contract because of its steep discount to near-month futures.

The Kaohsiung branch of Taiwan's Breakfast Soybean Procurement Association Tuesday bought 60,000 tons of Brazilian soybean at a premium of $3.055/bushel over November futures, basis cost and freight. The shipment is scheduled for the June 1-15 period.

-By Sameer Mohindru, Dow Jones Newswires; +(65) 6415-4085; sameer.mohindru@dowjones.com

(END) Dow Jones Newswires

April 25, 2012 03:09 ET (07:09 GMT)