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Soybeans hit record territory

08/30/2012 @ 4:05pm

U.S. soybean futures jumped to a record Thursday, buoyed by strong demand from China and concerns that global supplies will remain tight well into next year.

Soybeans for September delivery gained seven cents, or 0.4%, to close at $17.70 1/4 a bushel at the Chicago Board of Trade. Soybeans topped the previous record closing high set Wednesday and are up 48% for the year.

Soybeans also hit an all-time intraday high Thursday of $17.80 3/4 a bushel.

Prices have surged for much of the summer as a historic drought has eroded the size of the coming U.S. harvest. Lately, prices have picked up additional steam from healthy export demand.

The latest display of strong demand came Thursday morning, when the U.S. Department of Agriculture reported weekly net export sales of 721,300 metric tons, at the high end of expectations.

China has accounted for 64% of all U.S. soybean exports in the current marketing year, which ends Friday. In Thursday's weekly report, China accounted for at least 31% of the sales but likely much more, as nearly half of the sales were to undisclosed destinations, a category that usually includes China.

Traders have pushed futures higher because demand for U.S. soybeans from importers and domestic processors has remained robust in the face of record prices.

Strong export numbers like Thursday's have made for an explosive market. "It's like watching kindling, and the smallest spark sets it on fire," said Sterling Smith, commodity strategist with Citigroup in Chicago.

The USDA earlier this month projected the U.S. soybean crop will produce 2.692 billion bushels this year, down 12% from last year, due to the worst drought in decades.

Much of the nation's soybean crop already has reached maturity, so heavy rains from the remnants of Tropical Storm Isaac in the Midwest in the coming days will arrive too late to bolster yields, meteorologists said Thursday.

Global soybean supplies have suffered from disappointing production earlier this year in Brazil and Argentina, which also faced droughts. So strong crops in both South America and the U.S. next year will be necessary to rebuild inventories to comfortable levels, traders say.

"We've got too much demand and too little production," said Doug Bergman, vice president and trader with RCM Asset Management in Chicago, who thinks soybean futures could approach $20 a bushel later this year.

Corn futures ended mixed, as traders booked profits after corn rallied on concerns about this year's drought-plagued crop. Corn futures for December delivery fell five cents, or 0.6%, to $8.08 1/2 a bushel.

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