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U.S. Government Forecasts First Drop in Soybean Exports in 5 Years

By Karl Plume

CHICAGO, Jan 12 (Reuters) - The U.S. government expects the country's soybean exports to drop for the first time in five years as bumper crops in South America pose a stiff challenge for U.S. shipments abroad.

The drop is bad news for U.S. farmers struggling with low prices and record stocks of the oilseed as Argentina and Brazil, which surpassed the United States as the world's largest exporter in 2013, seize a larger share of the $48 billion global soybean export market.

In the most eagerly awaited crop report of the year on Friday, the U.S. Department of Agriculture cut its U.S. soybean export forecast to 58.79 million tonnes for the year ended Aug. 31, down 1.77 million tonnes from the prior-month forecast and down 370,000 from the previous year's record high.

Meanwhile, the agency lifted current-season Brazilian exports by 1.5 million to a record 67 million tonnes. The country is expected to grow 110 million tonnes of soybeans this season, its second-largest ever crop, the USDA said.

With Brazil's next harvest weeks away and farmers there still holding stocks from last year's harvest, the USDA may be forced to reduce its U.S. export outlook even further, traders and analysts said.

"Exports need a significant increase to still reach USDA's projection, and at this point I don't think we're going to get there," said Terry Reilly, senior commodities analyst with Futures International.

U.S. export sales for shipments since September are trailing year-ago sales by 14 percent, USDA data showed.

Reilly said the new crop from Brazil will undercut U.S. soy supplies.

"As soon as Brazil comes on line, they're going to be deeply discounted to U.S. regardless of how low the dollar goes," Reilly said, citing the weaker greenback on Friday, which reduces costs for buyers holding other currencies.

U.S. soybeans for February shipments from Gulf Coast elevators are around $370 per tonne on a free-on-board basis, about $9 per tonne below Brazilian prices, traders said.

But the U.S. price advantage narrows to around $4 to $5 per tonne in March, as newly harvested Brazilian beans flood to port. Buyers in top importer China are normally willing to pay premiums of at least $5 per tonne for Brazilian beans due to their higher protein and oil content, traders said.

"USDA didn't shock anyone by cutting (U.S. soybean) exports. The questions now is whether they'll be cutting it back even more next month," said a soybean trader who asked not to be named. (Reporting by Karl Plume; Editing by Simon Webb and Leslie Adler)

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