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Grains climb on supply worries

09/13/2012 @ 3:34pm

U.S. grain and soy futures rose Thursday, boosted by concerns about lower supplies in major growing regions.

Soybean prices rose as traders focused on worries about whether South America will produce enough soy to meet robust global demand next year. Wheat climbed on signs of higher demand at a time when some wheat-producing regions are grappling with hot, dry weather.

Chicago Board of Trade soybeans for November delivery settled up 1 1/2 cents, or 0.09%, to close at $17.47 1/4 a bushel, while soybeans for delivery in November 2013 rose 17 1/4 cents, or 1.3%, to $13.90 3/4.

Soybean traders were actively buying deferred-month soybean contracts and selling contracts for near-term delivery.

"Traders were buying the back end of the curve today," said Dan Basse, president of advisory firm AgResource Co. in Chicago.

The U.S. faces a shortage of soy supplies in 2013, but no near-term supply issues as the soybean harvest gets under way across the Farm Belt.

Investors are concerned about Brazil's ability to meet global demand next year due to its capacity constraints to ship grain, Mr. Basse said. The limitations of Brazil's export capacity--or ability to ship out grains and oilseeds--will keep buyers watching supplies from the U.S., Mr. Basse said.

U.S. soybean supplies are already projected to dwindle to precariously tight levels by next year, and uncertainty still surrounds South American crops that will be planted in the next month.

Light profit-taking pressured the most-active 2012 November contract for most of the day, as traders acknowledged that the market will have to chew through 40% to 50% of the U.S. harvest before supplies would tighten in the near term.

The U.S. already has sold 70% of the projected exports for the 2012-13 marketing year that ends Aug. 31, 2013.

In a weekly report Monday, the U.S. Department of Agriculture reported farmers have harvested 4% of the soybean crop.

Near-term soybean futures shed early losses, recovering on broader commodity buying thanks to the unveiling of the U.S. Federal Reserve's bond-buying program.

"The Fed's move is bullish for the grains," said Sterling Smith, futures specialist with Citi in Chicago. The move will weaken the U.S. dollar, making U.S. physical commodities less expensive to overseas buyers and increase competition for U.S. domestic consumers, Mr. Smith said.

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