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Beans climb on withering crop size

08/31/2011 @ 3:42pm

U.S. soybean futures end higher Wednesday, continuing a three-week trend of price gains, as traders factor in prospects for a tighter balance between supply and demand.

Prospects for smaller yield and production fuel the price rally, particularly with 2011-12 soybean end-of year supplies already forecast at precariously tight levels by government forecasters. The 2011-12 marketing year ends Aug. 31, 2012.

Soybean prices gained over 7% in value during August, reflective of drier than desired weather during the crops key reproductive stage of development. Soybeans for November delivery ended up 1/2 cent at $14.57 a bushel.

"It's easy to talk down soybean yields, as the crop moves through its key development stage," said Chad Henderson, analyst with Prime Ag Consultants, a Wisconsin brokerage and advisory firm.

Traders are digesting a steady dose of lower yield projections from private forecasters, a feature stoking ideas government forecasts will lower their crop outlooks, Henderson adds.

Soy prices climbed to their highest levels since July 2008 before light end-of-month profit taking by investors surfaced to trim advances. The soybean market bucked the weaker price theme in the neighboring corn market, as traders view price breaks as buying opportunities amid concerns about dry conditions eroding U.S. soybean yields further.

The U.S. corn market is in the same situation as soybeans, with farmers predicted to harvest fewer bushels this fall than they did last year. However, concerns about crop losses due to poor weather is largely baked into the market already, a situation encouraging investors to take some profits off the table after prices recently rallied to new contract highs.

"It's just a matter of people taking profits," says Mike Krueger of The Money Farm.

Corn for December delivery, the most active contract, end down 7 3/4 cents, or 1%, to $7.67 1/2 a bushel.

U.S. wheat futures finished higher, rebounding from early profit taking setbacks. Minneapolis spring wheat posted the strongest gains on poor harvest results, while hard red winter wheat, traded at KCBT, climbed as drought threatens to prevent planting of the next crop in the southern Plains this fall.

MGEX December added 13 1/4 cents to $9.46 1/2, KCBT December gained 3 cents to $8.95, and CBOT December wheat rose 3/4 cent to $7.91 1/2 a bushel.

Other Markets

CBOT December soymeal dropped $0.80 to $387.80/short ton, and December soyoil climbed 0.31 cents to 59.07 cents/pound. CBOT November rice soared 27 cents to $17.94 1/2 per hundredweight.

Ethanol for December delivery slipped 0.7% to $2.771 per gallon. Oats for December delivery ended down 0.4% at $3.72 1/2 per bushel.

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