Archer Daniels Midland Co. (ADM:US), the largest grain processor, said supplies of corn and soybeans will tighten this year after drought hurt crops in South America and demand increases for ethanol.
“It’s going to be difficult to buy beans going forward, and we will see a reduction in exports as South America will rationalize what they have,” Craig Huss, ADM’s chief risk officer, said today during an earnings conference call with analysts.
Soybean output in South America may be 15 percent smaller than a year ago after hot, dry weather reduced yields, increasing demand for supplies from North America, Juan Luciano, the chief operating officer for Decatur, Illinois-based ADM, said on the call.
“We’ve been exporting a little bit more,” Luciano said. “We see in that window that traditionally new supply shifts to South America, maybe extending a little bit to the U.S.,” boosting sales of soybeans and soybeans meal to China, Poland, the Philippines and other countries, he said.
The U.S. will export at least 2.3 million metric tons of soybeans to China from June to August, compared with 600,000 tons a year earlier, the Hamburg-based researcher Oil World said today in a report.
Rising global demand is encouraging U.S. producers to plant more this year, according Huss. Farmers will increase corn sowing by 4.3 percent to the highest in 75 years, while reducing soybean planting by 1.4 percent to 73.9 million acres, the U.S. Department of Agriculture said March 30.
Soybeans may be more difficult to purchase later this year without an increase in planted acreage, Huss said during the call with analysts following the announcement of third quarter earnings. Rising prices for the oilseed relative to corn and an early wheat harvest may increase U.S. planting, he said.
Soybean futures rose to $15.07 a bushel on April 30, the highest since July 2008. The July contract fell 0.2 percent to $15.025 a bushel at 12:40 p.m. on the Chicago Board of Trade, the first drop in six sessions.
“We are very concerned about it,” Huss said. “We can see another potentially million acres of beans come back” into production this year, he said.
Huss said corn supplies will be more difficult for ethanol producers and feed manufacturers to buy in the next 30 days. The government has forecast that U.S. corn inventories before the harvest will drop to the lowest since 1996, after adverse weather reduced yields last year.
“There is dislocation this year” with more crop stored in the western Midwest than in the eastern growing region, Huss said. “When you get any kind of flat price breaks, we see export demand coming, and that tends to give more competition for those eastern and central plants as they draw the same corn that the ethanol plants are trying to purchase.”
ADM rose 6.3 percent to $32.76 at 1:42 p.m. in New York, after touching $33.25, the highest since May 31.
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