Soybean Reserves Smallest in Four Decades After Drought [View all]
By Jeff Wilson and Tony C. Dreibus - Sep 11, 2012 10:44 AM ET
The smallest U.S. soybean harvest in nine years will leave inventories in the world’s largest exporting nation at the lowest in four decades.
U.S. farmers will reap 13 percent less than a year earlier after the worst Midwest drought in 76 years, according to the average of 34 analyst estimates compiled by Bloomberg. Reserves will be the lowest since 1973 by March, estimates INTL FCStone Inc., which handled $75 billion of physical commodities in 2011. Futures will advance 17 percent to an all-time high of $20 a bushel in three months, Goldman Sachs Group Inc. predicts.
Crop prices surged to records this year as drought parched fields across the U.S., South America and Russia. The U.S. Department of Agriculture cut its forecasts the past two months and the Bloomberg survey indicates the agency will do so again tomorrow, leaving Brazil as the top soybean supplier for the first time. Feed costs are rising for meat producers including Tyson Foods Inc. (TSN), the largest in the U.S., and three United Nations agencies said Sept. 4 that swift action is needed to avert a food crisis.
“The U.S. will simply run out of soybeans” for exports on March 1, said Doug Jackson, an FCStone vice president in West Des Moines, Iowa, who has been a grain-industry analyst since 1974. “The supply situation is unprecedented. The theoretical maximum South American shipping capacity may fall short, leaving world buyers wanting.”