Soybean futures jumped the most in three weeks after the U.S. said a lingering Midwest drought will cut output more than estimated. Corn fell to a seven-week low on signs that the harvest will shrink less than analysts forecast.
Domestic soybean production will drop to 2.634 billion bushels this year, the smallest crop in nine years and down 14 percent from 2011, the U.S. Department of Agriculture said today in a report. The average estimate of 34 analysts surveyed by Bloomberg was 2.659 billion. Prices for farmers will average a record $16 a bushel in the year that began Sept. 1, up 29 percent from a year earlier, the USDA said.
“Soybean supplies will be tight this year, and prices will stay elevated to slow demand,” Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “We have yet to see any evidence of slowing demand either in the U.S. or from overseas buyers.”
Soybean futures for November delivery rose 2.6 percent to close at $17.4575 a bushel at 2 p.m. on the Chicago Board of Trade, the biggest gain for a most-active contract since Aug. 21. The price rose for the first time since Sept. 4, when the oilseed reached a record $17.89.
Demand for U.S. soybeans is forecast to drop 15 percent this year, the USDA said. Export sales, which are already at a record for the start of the marketing season, will fall 22 percent to the lowest in seven years, while domestic processing is projected to decline to the lowest since 1997, USDA data show.
Corn futures for December delivery fell 1 percent to settle at $7.695 a bushel, the third straight decline. Earlier, the price touched $7.5925, the lowest since July 24. The grain, down 9.4 percent from a record $8.49 on Aug. 10, has climbed 19 percent this year.
U.S. production will total 10.727 billion bushels, the smallest crop in six years and down 13 percent from 12.358 billion in 2011, the USDA said today. The average prediction of 35 analysts surveyed by Bloomberg was for 10.42 billion. Supplies on Aug. 31 will be greater than analyst estimates.
“The corn crop is a little larger than people expected,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “Prices were high enough earlier this year to slow demand,” as livestock producers sought cheaper feed alternatives and began to shrink herds, Roose said.
Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show.