Soybeans fall on prediction of jump in supplies

AP News
Posted: Dec 09, 2011 4:00 PM
Soybeans fall on prediction of jump in supplies

Soybean prices dropped 2.3 percent Friday after the government predicted a hefty jump in stockpiles and weaker export demand.

The U.S. Agriculture Department report also forecast bigger inventories of wheat and corn, which sent prices for both crops lower.

Soybean inventories were forecast at 230 million bushels by the end of next summer's season. That's an 18 percent increase from the agency's November forecast. U.S. farmers are expected to face more competition from other countries and a slower pace of shipments, the agency said.

One key competitor for the U.S. is Brazil, which not only has a good crop of the protein-rich beans but is selling more to China, Northstar Commodity analyst Jason Ward said. China is the No. 1 buyer of U.S. soybeans.

"That is hurting us in the export arena because soybeans in Brazil are cheaper," Ward said. "The U.S. supply is ratcheting up as we lose that business to South America."

In addition, there are fresh signs of a slowdown in China's economy. The government reported a 4.2 percent decrease in inflation in November and said industrial production dropped to its slowest pace in two years last month. That raises the likelihood of fresh moves to keep growth on track.

The Agriculture Department forecast a 6 percent increase in wheat stockpiles and a little less than a 1 percent increase in corn supplies.

The agency issues monthly estimates of year-end stockpiles for crops from corn to sugar. Each month, the numbers are adjusted to reflect changing market conditions.

Soybeans for January delivery fell 25.5 cents to finish at $11.07 per bushel. March wheat fell 1 cent to end at $5.96 per bushel and March corn fell 6 cents to $5.9425 per bushel.

In other trading, metals rose after nearly all European Union countries agreed to sign a treaty that would give a central European authority closer oversight of their budgets. Debate over the proposed agreement kept most commodities trading in a narrow range this week because of concerns over the region's lingering debt crisis and what impact it could have on demand.

Gold for February delivery rose $3.40 to end at $1,716.80 an ounce. In March contracts, silver increased 71.5 cents to $32.253 an ounce, palladium rose $11.20 to $686.50 an ounce and copper increased 5.75 cents to $3.5575 per pound. January platinum ended up $21.40 at $1,515.80 an ounce.

The developments in Europe also benefited oil. Benchmark crude rose $1.07 to finish at $99.41 per barrel on the New York Mercantile Exchange.

Heating oil fell 1.73 cents to end at $2.9125 per gallon, gasoline futures rose 2.95 cents to $2.5961 per gallon and natural gas declined 14 cents to $3.317 per 1,000 cubic feet.