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Soy prices rise on lower yield outlook

08/30/2011 @ 3:52pm

 U.S. soybean futures rose Tuesday, fueled by the ongoing threat of declining production potential.

The combination of disappointing yield reports from private analysts and declining crop ratings from government forecasters have traders factoring in lower yield and production outlooks.

"The fundamentals of the market warrant firm price action," said Tim Hannagan, grains analyst with brokerage PFG Best in Chicago.

Soybeans for November delivery at Chicago Board of Trade ended up 10 cents at $14.57 a bushel, setting a fresh high for the current upward price move.

Industry analysts are concerned about any drop in crop potential, particularly with new crop soybean end of year supplies already forecast at precariously tight levels by government forecasters.

U.S. Department of Agriculture Monday said U.S. soybean crop ratings slipped 2 percentage points to their lowest level of the year. That raises fear that USDA will lower its yield and production forecasts in their next production report Sept. 12, Hannagan says.

There is a growing consensus among traders for a reduction in yield, as dryness in key growing areas of central Illinois, Indiana and Missouri leave industry analysts expecting further crop deterioration.

The crop is in its most important period of growth and needs rain to finish developing ahead of the upcoming harvest. Traders are on edge about the weather because soybean and corn inventories are projected to reach historically low levels in the coming year.

The potential for lower output makes it tough to attract sellers, with investors and grain buyers viewing any break in prices as a buying opportunity, Hannagan said. This feature helped corn recover from an early profit taking setback.

Corn for December delivery, the most active contract, end up 5 1/4 cents, or 0.7% at $7.75 1/4 a bushel.

Wheat futures end lower, fueled by projections for rains to ease severe dryness in the Plains. Parts of Texas, a key grower of hard red winter wheat, are forecast to receive some needed moisture ahead of planting.

Kansas City hard red winter wheat for December delivery ended down 7 cents, or 0.8%, at $8.92 a bushel. Chicago Board of Trade soft red winter wheat contract for December delivery finished down 4 1/4 cents, or 0.5%, at $7.90 3/4 a bushel.

Other Markets

CBOT December soyoil end up 0.18 cents at 58.76 cents a pound, and December soymeal was up $2.20 at $388.60 per short ton. CBOT November rice end up 13 1/2 cents at $17.67 1/2 per hundredweight.

Ethanol for December delivery slipped 0.2% to $2.790 per gallon, and oats for December delivery end down 2.6% at $3.74 a bushel.

-By Andrew Johnson Jr, Dow Jones Newswires; 312-347-4604; Andrew.johnsonjr@dowjones.com

(END) Dow Jones Newswires

August 30, 2011 16:11 ET (20:11 GMT)

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