The International Grains Council Friday reduced its global soybean production forecast for 2011-12, citing an ongoing dry spell in South America, which will likely reduce output.

The IGC forecast soybean output at 256.4 million tons in 2011-12, down 0.8% from its previous forecast and 4% from the a record global harvest in 2010-11. The IGC figures are for the aggregate marketing year of major producing and exporting countries.

Lower output amid record demand is propelling prices higher, with U.S. soybeans offered at $461 a metric ton, free-on-board, on the Gulf coast Wednesday, up 5.3% since end-November.

The IGC cut its forecast for Argentina by 2.9% to 51 million tons, although this is 4.3% higher than actual production in 2010-11. Sowing, which is nearing completion, has been hampered by dry conditions, despite recent beneficial rains, and yields will likely be lower, it said.

The council forecast Brazil's output at 71.8 million tons, down 0.5% from its previous forecast and 4.6% from actual production in 2010-11. Crops are relatively more advanced than in Argentine, with harvesting under way. While northern areas of the country's soybean belt, notably the key state of Matto Grosso, have received beneficial rains in recent weeks, southern parts remained dry.

In Paraguay, adverse conditions have affected crop prospects, with the IGC projecting output to fall 10% from its previous forecast and 14% on year, to 7.2 million tons.

The IGC is forecasting soybean production in the U.S., the world's top exporter until 2010-11, at 83.2 million tons, up 0.4% from its previous forecast but 8.2% lower on year in the marketing year that began Sept. 1. Soybean output is falling even as demand rises, and the IGC forecast global trade in 2011-12 to rise 3.9% to 94.9 million tons, with Brazil expected to leapfrog the U.S. as the top exporter for the first time.

China, which accounts for 60% of global imports, will likely ship in 57 million tons of soybeans in the marketing year that started Oct. 1, up 8.8% on year.

The global soymeal trade may expand by 6%, to 60 million tons, on the back of strong demand in East Asia. South Korea may increase its imports by 25%, to 2.0 million tons, and Thailand by 13% to 2.7 million tons, the IGC said.

Meanwhile, global rapeseed output will likely be unchanged in 2011-12, just short of 60 million tons, as lower output in the European Union will be offset by gains in Australia and Canada, it said, forecasting the global trade to rise by 500,000 tons, to 10.9 million tons.

-By Sameer Mohindru, Dow Jones Newswires; +(65) 6415-4085; sameer.mohindru@dowjones.com

(END) Dow Jones Newswires

January 20, 2012 04:38 ET (09:38 GMT)