SOYBEAN PRICES HAVE SOARED past 15-year highs, and the market's message to American farmers could not be clearer: Plant more soybeans, and plant them thick.
Even an expected bumper crop of soybeans in the U.S., the world's largest exporter, might not be enough this year to stem the rise in prices and sate the world's growing appetite for the commodity, say analysts. Some say prices could reach all-time highs this summer, following a 70% rise in the past year that lifted them above $10 a bushel for only the fourth time in history.
Despite soybeans futures' sharp, 50-cent drop last week on the Chicago Board of Trade to the exchange's lower daily trading limit, analysts are convinced prices must still climb high enough to ration demand for scarce U.S. soybean supplies.
U.S. farmers are expected to plant 75.411 million acres of American farmland with soybeans this year -- the largest acreage cultivated for the oilseed in U.S. history, the U.S. Department of Agriculture said last month in its prospective seedings report. Yet even that may not be enough to feed the world market's growing appetite, say analysts.
"Production just hasn't been able to keep up with consumption. That's the bottom line," says Anne Frick, oilseeds analyst for Prudential Securities in New York.
Follow the longest line of sea-going vessels laden with soybeans, and they will lead straight to China. Just in the last three years, China has doubled its soybean intake to 20.5 million metric tons to feed the country's growing protein demand. In three years, China's imports are expected to hit 30.5 million tons, the USDA says.
Farmers in the U.S. and South America are hastily trying to keep up, but their efforts have fallen short in the last year. Yields in both the U.S. and South America have been held in check by bushel-zapping droughts. The damaging Asian rust fungus in Brazil -- the world's second-largest soybean producer behind the U.S. -- also has stolen bushels.
Even if the U.S. this year were to plant the record-breaking 75.411 million acres with soybeans, yields also would have to hit a record to satisfy demand, Frick says.
In South America, the USDA forecasts Brazil will produce 56.5 million metric tons. If realized, that would break last year's record of 52.5 million tons. But analysts expect the government to shave that projection to between 52 million and 54 million tons because of the drought and Asian rust problems. That would place a greater burden on the U.S. to perform beyond expectations in this year's crop, which is on the verge of planting season.
"The usage has to be filled by South America, and yet, it looks like the South American crop might not have any increase at all," Frick says. "In fact, it may decline."
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