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Acreage worries push soybeans higher

04/02/2012 @ 3:42pm

U.S. soybean futures closed higher Monday, hitting a seven-month high on concerns that U.S. farmers this year may not plant a large enough soy crop to meet strong domestic and export demand.

Soybeans for May delivery settled up 18 cents, or 1.3%, at $14.21 a bushel at the Chicago Board of Trade on Monday, the highest close for the front-month contract since Sept. 2. November soybeans rose 27 1/4 cents, or 2.0%, to $13.85 1/4 a bushel.

Market participants Monday continued to drive up soy prices to make it more attractive for U.S. farmers to plant the crop instead of corn, traders said.

Marketeye wraps up Monday's trade

Traders are still digesting two U.S. Department of Agriculture reports issued Friday, which included a forecast for U.S. soybean acreage this year to be 73.9 million acres, below the low end of analyst estimates. That forecast, down from U.S. soy plantings of 75.0 million acres last year, renewed concerns that soybean supplies could fall to uncomfortably low levels later in the year, and boosted futures on Friday.

Friday's rally for the first time this season gave farmers an economic incentive to plant soybeans instead of corn on land that was planted with corn last year, but soybean prices "can still work harder to encourage U.S. acreage growth" for soybeans, Morgan Stanley analyst Hussein Allidina said in a research note Monday.

Optimism about export demand also fueled Monday's gains. USDA on Monday said private exporters reported the sale of 120,000 metric tons of soybeans to China for delivery during the current marketing year. USDA also reported the sale of 120,000 metric tons of soybean cake and meal to "unknown destinations" for the 2012-2013 year beginning Oct. 1.

Drought-damaged soy crops in Brazil and Argentina have driven soy futures higher since mid-December, on the expectation that lower South American supplies will drive more export demand to the U.S.

Still, some analysts questioned if soy prices still need to rise to attract more U.S. plantings.

Planting soybeans has already become more profitable than corn, and the USDA's figures, based on a survey done in early March, wouldn't reflect changes in farmers' plans since then, said Ken Morrison, who edits and publishes Morrison On The Markets, an online agricultural-markets column.

Due to a large net number of long positions recently held in the crop's futures, soybeans might also risk a lengthened decline if prices turn downward, Morrison said. "If someone wants to take profits aggressively, there is such a small ratio of short positions in the market that there's really not a buffer there," he said.

Meanwhile, corn futures rose on concerns about tight current supplies, adding to a limit-up increase in May corn on Friday that was sparked by USDA reporting lower-than-expected domestic inventories.

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