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Soybean futures shoot to record highs

07/09/2012 @ 4:00pm

U.S. soybean futures jumped to settle at a new all-time high Monday, as concerns continued to mount that a worsening drought in the Midwest could reduce the U.S. crop's yield.

Chicago Board of Trade July soybeans, which are being thinly traded ahead of the contract's expiration Friday, settled up 45 1/4 cents, or 2.8%, at $16.65 a bushel, after trading as high as $16.79 1/2 a bushel during the session. Before Monday, the all-time high for a front-month soybean contract was $16.63 a bushel, reached in July 2008.

November soybeans rose 42 cents, or 2.8%, to $15.47 3/4 a bushel.

Analysts say soybean crops, unlike corn, could recover from the recent dry conditions if rain picks up in coming weeks, since the key growing period for soybeans is in August. Still, "we can't discount the fact that...it's been kind of a rough start," said Dan Dempsey, an analyst at EHedger in Clarendon Hills, Ill.

The price jump came as soybean traders waited for the U.S. Department of Agriculture to release updated condition ratings for the crop, which showed after trading closed that just 40% of the soybean crop was in good or excellent condition, down from 45% a week ago. Analysts had expected the continued sharp decline.

Traders are particularly sensitive to any threats to U.S. production this year since soybean output in South America this year was already curtailed due to a drought, which analysts say could lead to greater export demand for U.S. soybeans.

Indeed, despite higher prices, soybean export demand has also remained strong in recent weeks, which could mean that even higher soybean prices are still justified, traders said.

"We continue to do business," Mr. Dempsey said.

Separately, corn futures jumped on Monday, also approaching all-time high levels due to worries about the Midwest drought. Futures for September, December and March delivery all went limit-up early in the session before easing from those levels.

CBOT July corn, a contract that expires Friday, rose 32 cents or 4.3% to $7.75 1/4 a bushel. The all-time high for front-month corn is $7.99 3/4 a bushel. December corn settled up 37 cents or 5.3% at $7.30 a bushel.

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