Soybeans futures settled at their highest in more than two years on Tuesday after the Agriculture Department, USDA, slashed its forecast for the United States soybean production to 3.375 billion bushels from 3.408 billion bushels the previous month.
The US soybean harvest has been affected by some late summer, early fall dryness in the southern U.S. and lower-than-expected yields in northern and western states.
The USDA also downgraded further its estimates for corn, which comes on top of record forecast cuts in October. As revised, corn’s 2010/2011 production is expected by the USDA to total 12.54 billion bushels, down from 12.664 billion bushels seen in the prior month.
Government forecasters also lifted production expectations for soybeans in Brazil and Argentina, among the world’s top producers, but analysts were concerned about potential dry-weather conditions in these two countries.
“The impact of La Niña on Argentina’s soybean production in 2008 remains fresh in the mind, and as the tightening U.S. soybean balance sheet will not be able to accommodate a similar sort of production setback in South America this season, this is a major risk which needs to be monitored closely over coming months” analysts at Rabobank said in a report to clients Tuesday.
In 2008, dry conditions in Argentina and other parts of South America due to the weather phenomenon La Niña worsened a rough spot for U.S. soybeans as that year’s spring was very wet.
Soybeans for January delivery, the most active contract, rose 54 cents, or 4.3%, to settle at $13.29 a bushel (484.75 the ton) on the Chicago Board of Trade, its highest close since late August 2008.