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U.S. Soybean-Reserve Estimate Cut on Rising Food, Feed Demand

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Jan. 12 (Bloomberg) -- U.S. soybean inventories before next year’s harvest will be 15 percent smaller than forecast a month ago because of rising demand for animal feed and cooking oil, the government said.

Supplies will total 140 million bushels on Aug. 31, down from 165 million projected in December, the U.S. Department of Agriculture said today in a report, cutting its forecast for the fifth straight month. The average estimate of 28 analysts surveyed by Bloomberg News was 157 million bushels.

“Supplies are going to be near the bare minimum pipeline supply” before this year’s harvest begins, Anne Frick, the senior oilseed analyst for Prudential Bache Commodities LLC in New York, said before the report. “Farmers need to plant more acres this year and that will likely require higher prices” to compete with corn, cotton and other crops, she said yesterday.

The report was released before the start of regular trading on the Chicago Board of Trade, where soybean futures for March delivery yesterday fell 23.5 cents, or 1.7 percent, to $13.57 a bushel.

The price reached $14.09 on Jan. 3, the highest for the most-active contract since August 2008. Futures soared 34 percent in 2010, the most since 2007, on record Chinese demand for U.S. supplies.

Tight Inventories

U.S. inventories will be tight relative to consumption, Frick said. That may boost feed costs for meat producers including Tyson Foods Inc. and Smithfield Foods Inc. and increase global demand for fertilizer from Mosaic Co. and seeds from Monsanto Co.

A 43 percent surge last year in the cost of cooking oil made from soybeans likely will help to boost food prices this year by as much as 5 percent from less than 2 percent in 2010, said William Lapp, the president of Advanced Economic Solutions in Omaha, Nebraska, and a former economist at ConAgra Foods Inc.

In a separate report, the USDA said the U.S. soybean supply on Dec. 1 fell 2.6 percent to 2.277 billion bushels from 2.339 billion a year earlier. Traders surveyed by Bloomberg expected 2.336 billion bushels.

‘Challenging Year’

“Ultimately, the consumer will pay the price” for the inability of world farmers to keep up with surging demand, Lapp said. “It’s going to be a challenging year.”

The USDA reduced its estimate of the country’s 2010 soybean crop to 3.329 billion bushels, down 1.4 percent from last month’s estimate of 3.375 billion. A year earlier, the harvest totaled 3.359 billion bushels.

The forecast for U.S. exports in the marketing year that ends Aug. 31 was unchanged at 1.59 billion bushels. That compares with 1.501 billion bushels in the previous year. The amount that will be processed into animal feed and cooking oil was forecast at 1.655 billion bushels, down from 1.665 billion projected in December and 1.752 billion in the previous year.

World soybean production will total 255.5 million metric tons, less than 257.8 million forecast in December, as Argentina, the third-biggest producer, harvests a smaller crop, the department said. In the previous year, world output was a record 260.1 million tons.

Global inventories of the oilseed on Sept. 30 will be 58.3 million tons, down from 60.1 million forecast in December, the USDA said. A year earlier, supplies totaled 60.2 million.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth in Chicago at sstroth@bloomberg.net.

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