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Soybeans lead grains higher Thursday

06/07/2012 @ 3:41pm

U.S. soy futures closed higher Thursday, boosted by concerns that U.S. soybean inventories could fall lower than expected.

Soybeans for July delivery closed up 41 3/4 cents, or 3.0%, at $14.28 a bushel at the Chicago Board of Trade. November soybeans rose 42 cents to $13.41 1/4 a bushel.

July soybean meal rose $10.90 to $425.50 a short ton, and July soybean oil rose 1.14 cents to 50.39 cents a pound.

Soybean futures rallied earlier this year as reduced output in drought-stricken South America led to expectations for smaller world supplies and greater export demand for U.S. soybeans, including by China. Soybeans then fell sharply in May, largely due to expectations for greater soy plantings in the U.S.

Now, front-month soybeans have rebounded 6.6% from a closing low reached on May 31, as traders have become concerned about dry weather hindering development of the U.S. crop and reducing the potential for farmers to double-crop, or plant soybeans immediately after harvesting wheat.

Updated weather forecasts on Thursday for the Midwest showed lower expectations for rain next week. Already, generally hot and dry weather in recent weeks has left some soy crops in need of drier soil to germinate.

"We've got dry weather concerns," said Hugh Whalen, an analyst at Mid-Co Commodities, a brokerage in Bloomington, Ill. "It's still plenty early obviously for soybeans, but still, given the tight stocks situation and the expected tight situation a year from now...any production downfall is going to just magnify that."

Soybeans also rose because traders are expecting the U.S. Department of Agriculture, in a supply-and-demand report due Tuesday at 8:30 a.m. EDT, to lower its forecast for the current marketing year's ending stocks, due to stronger export demand. Analysts on average expect the USDA to forecast domestic inventories of 197 million bushels, which would be down 8.4% from a year earlier and below the USDA's previous forecast for 210 million bushels.

Analysts expect the USDA to forecast domestic soy inventories of 147 million bushels for the end of the 2012-13 marketing year, up 1.4% from the USDA's last estimate of 145 million bushels.

Due to expectations for tightening world supplies, analysts say, soybean futures are likely to remain highly sensitive to any risks that could shrink the size of the U.S. crop.

Corn and wheat futures also rose Thursday, both boosted by outside markets including a weaker dollar. Worries about dry soil in the corn belt also boosted corn futures, as traders worried that the health of crops there could decline.

CBOT July corn rose 7 3/4 cents to $5.94 a bushel. December corn rose 17 cents to $5.36 1/2 a bushel.

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