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High prices cool soybean demand

03/09/2012 @ 3:20pm

U.S. soybean futures ended lower Friday, as forecasters predicting high prices will both slow global demand and boost the size of the crop U.S. farmers plant stalled a 5-week rally in the market.

Soybean prices had rallied to six-month highs as dry weather curbed production in Brazil and Argentina, a feature that traders thought would boost U.S. export demand.

Despite the U.S. Department of Agriculture in its closely-watched monthly crop report cutting its production estimates for Brazil and Argentina, traders focused on how USDA forecasters predicted rising prices will cool global export demand.

"The USDA report did not do soybeans a lot of favors, as the cut in world supply was not met with increased U.S. demand," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.

"The sensitivity of demand to price was reflected by USDA leaving U.S. soy export forecasts unchanged from prior forecasts," Zuzolo said. "It shows demand will be lost or substituted as prices go up," he added.

Grain market summary for Friday, March 9 

The USDA in its report said Brazil, the world's second-largest soybean-producing nation behind the U.S., will produce 68.5 million metric tons of soybeans this year, a 4.9% drop from the agency's February forecast. Argentina's production was lowered by 3.1% to 46.5 million metric tons.

"Traders took profits on prior gains, factoring in the potential for USDA's numbers being an accurate measure of South America's crop size," said Dan Cekander, analyst with brokerage Newedge in Chicago. "Traders acknowledge that they may not see any additional significant reductions in Latin American output unless there are issues in harvesting" he added.

The soybean outlook became further muddled by an influential crop plantings report released Friday by Memphis, Tenn.-based agricultural consultancy Informa Economics. Traders said the firm raised its outlook for the number of acres U.S. farmers would plant with soybeans come spring.

Soybean futures for May delivery, the most-actively traded, closed down 3/4 cent, or 0.1%, to $13.37 3/4 a bushel.

Corn and wheat markets managed to climb Friday. Corn rose amid speculation China is buying U.S. corn, as well as from tight cash markets. U.S. wheat futures managed to ward off pressure from a sharply higher U.S. dollar, fueled by the USDA lowering its outlook for domestic year-end supplies by 2.4% on increased exports.

CBOT May wheat ended up 8 1/4 cents at $6.43 per bushel, May KCBT rose 1/4 cent to $6.84 and May MGEX climbed 1 1/2 cent to $8.05.

CBOT May corn ended up 9 1/2 cents at $6.45 per bushel.

-By Andrew Johnson Jr, Dow Jones Newswires; 312-347-4604; Andrew.johnsonjr@dowjones.com
(END) Dow Jones Newswires
March 09, 2012 16:13 ET (21:13 GMT)
DJ US GRAIN AND SOY REVIEW: Soy Rally Stalls; High Price Cools Demand->copyright

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