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Beans in the teens

02/27/2012 @ 3:30pm

U.S. soybean futures extended their recent rally Monday, climbing to new five-month highs on strong export demand and declining South American crop forecasts.

Soybeans have been grabbing the spotlight in the grain and oilseed complex over the past few weeks, due in large part to an increase in export demand.

Soybeans rallied to new near-term highs for the sixth consecutive day, as traders remain relentless buyers amid worries that government forecasters are underestimating export demand.

"The current pace of sales could lead to a considerable adjustment in U.S. Department of Agriculture's export forecast for the year as early as their March 9 report," said Rich Nelson, director of research at advisory firm Allendale Inc. in McHenry, Ill.

A higher export estimate would tighten soybean's supply-demand balance, as end-of-year supplies would drop by a similar margin, Nelson added.

Smaller South American production forecasts continue to support soybeans, reflected in China--the world's leading importer of soybeans--turning to the U.S. for large amounts of beans last week.

Worries that Brazilian supplies available for export may not be as plentiful as previously thought are making soybean inventories more attractive to world buyers. Traders are optimistic for more export business with China, as dry weather cut production potential for Brazil crops.

Lower Brazilian production estimates from private forecasters added to the bullish theme. Brazil Consultancy AgRural is the latest firm to lower Brazil's crop outlook, cutting its estimate to 68 million metric tons, down from 70.2 million last month.

Analysts say a logjam of soybeans waiting for shipment from Brazil ports is shifting some Chinese business to U.S. origins as well.

Meanwhile, the need for soy prices to remain competitive with corn to secure enough 2012 acres to maintain adequate supplies continued to support new crop soy prices. Traders are shifting their focus to new crop planting potential, with the USDA forecasting a hefty increase in corn acres at the expense of other crops in 2012.

The jump in soy prices not only helps cool demand to limit supply tightness, but also serves as an incentive to encourage farmers from shifting as many U.S. acres to corn in 2012.

"We are starting to hear the first discussions of farmers rethinking their planting plans following the rally in soybeans," Nelson said.

Corn and wheat futures climbed with soybeans, rebounding from early weakness tied to pressure from external financial markets.

Firm cash prices and solid export demand enabled futures to bounce off initial lows.

The strength of soybeans, coupled with outside financial markets paring early losses, attracted speculative buying to help propel wheat futures after spring wheat futures slumped to 15-month lows recently.

CBOT May soybeans ended 15 3/4 cents higher at $13.02 1/2 a bushel.

MGEX May wheat ended up 6 1/4 cents at $7.98 3/4 a bushel while CBOT May climb 11 1/2 cents to $6.52 3/4 and KCBT May gained 5 1/4 cents to $6.93 1/2.

CBOT May corn ended up 4 1/2 cents at $6.48 1/24 a bushel.

-By Andrew Johnson Jr, Dow Jones Newswires; 312-347-4604;

(END) Dow Jones Newswires

February 27, 2012 15:53 ET (20:53 GMT)

DJ US GRAIN AND SOY REVIEW: Strong Demand Push Soy To 5-Month Highs->copyright

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