U.S. soybean farmers will harvest the smallest crop in nine years after June and July were the hottest and driest since 1936, the government said. Prices rose the most in three weeks.
Production will drop to 2.634 billion bushels (71.69 million metric tons), down 14 percent from 3.056 billion in 2011 and the lowest since 2003, the U.S. Department of Agriculture said today. The average estimate of 34 analysts polled by Bloomberg News was 2.659 billion bushels. A month ago, the USDA predicted 2.692 billion.
Soybean prices are up 45 percent this year, reaching an all-time high last week, as crop conditions deteriorated to the worst since 1988. Output is dropping for a third straight year in the U.S., the largest grower, as demand increases for soy- based livestock feed and vegetable oil in China, where imports are forecast to reach a record for a ninth year.
“We have a huge shortage that is unprecedented and will require higher prices to slow demand,” Jerry Gidel, the chief feed-grain analyst for Rice Dairy LLC in Chicago, said in a telephone interview. “The U.S. beef and dairy industry will have to use less soybean feed to leave enough for the hog and poultry producers the remainder of this year.”
Soybeans for November delivery jumped 2.6 percent to close at $17.4575 a bushel at 2 p.m. on the Chicago Board of Trade, the biggest gain since Aug. 21. Prices reached a record $17.89 on Sept. 4.
Soybean meal for delivery in December rose 3.1 percent to $532.10 for 2,000 pounds on the CBOT. The high-protein animal feed, which rose the most since Aug. 9, reached a record $541.80 on Sept. 4. The feed ingredient has risen 70 percent this year.
Soybeans and soybean meal have gained the most this year among the 24 commodities tracked by the Standard & Poor’s GSCI Index, outpacing gains in global equities and U.S. Treasuries.
Falling supplies may reduce margins for meat producers Tyson Foods Inc. (TSN:US) and Smithfield Foods Inc. (SFD:US), which buy soy-based animal feed. Cargill Inc. said last month that quarterly earnings fell 82 percent because of poor trading performance and lower beef margins.
Oilseed processors such as Bunge Ltd. (BG:US) and Archer Daniels Midland Co. may benefit from a global shortage of animal feed. The central Illinois crush spread -- the difference between the cost of a bushel of soybeans and the value of the meal and oil it can produce -- is more than double the average of the past nine years.
“The rising margins means it will be more difficult to slow consumption quickly,” Roy Huckabay, an executive vice president for the Linn Group in Chicago, said by telephone. “Soybeans need to rise in value relative to soybean meal and soybean oil to curtail soybean use.”
Farmers will collect about 35.3 bushels per acre, the lowest yield since 2008 and down from 36.1 bushels forecast in August and 41.5 bushels last year, the USDA said in today’s report. About 74.6 million acres will be harvested, unchanged from August, the department said.
Reserve supplies before next year’s harvest will total 115 million bushels, the USDA said. Analysts expected 106 million, on average. The surplus on Aug. 31 will total 130 million bushels, compared with 145 million estimated in August, according to the report.
The USDA said the average farm-gate price in the marketing year that began Sept. 1 will be a record $16 a bushel, unchanged from last month and 29 percent higher than last year.
World production in the year that begins Oct. 1 will reach 258.13 million metric tons, down from 260.46 million forecast a month ago and up from a revised 237.09 million produced this year, according to the report. Brazil, which will produce 81 million tons this year, will surpass the U.S. as the top producer for the first time, the USDA said.
Global soybean consumption will rise to a fourth straight year to a record of 256.73 million tons, up 0.9 percent from a year ago. Use in China, the biggest importer and hog producer, will rise to a record 75.02 million, the ninth straight increase.
World soybean inventories next year before the Northern Hemisphere harvests will total 53.1 million tons, down from 53.38 million forecast in August and 53.65 million projected for Sept. 30 this year. Traders expected 52.01 million tons, on average.
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