031023 Low Soybean Crop Will Affect Meat Prices

Chicago - Soybean futures in Chicago skyrocketed in a wild day of trading Friday after the U.S. Department of Agriculture predicted that annual soybean production will be at its lowest level since 1996.

Agriculture officials said the drought had caused more damage to soybeans than they had believed a month ago, before harvesting went into full swing.

Experts said consumer prices for soybean oil can be expected to rise minimally. Longer term, the higher soybean meal prices could boost meat and poultry prices a year or two from now, said Al Kluis, an analyst with NorthStar Commodities of St. Paul.

Drought in Minnesota, where soybeans are the state's leading crop, led to the estimated 23% drop in the state's expected soybean production from 2002. A severe infestation of aphids also hammered soybeans.

Meanwhile, the USDA said corn production and yield are expected to hit an all-time high across the nation. That news sent corn futures downward by 5 1/2 cents to $2.16 1/4 a bushel -- the lowest price in two months.

However, the government said corn production in Minnesota is predicted to drop 9.6% from 2002 levels.

In Chicago Friday, soybean futures closed at $7.13 1/2 a bushel -- a 21 cent jump per bushel. With supplies down, prices for soybeans are running at their highest prices in nearly six years. They've skyrocketed more than 40% in the past two months.

"The key question for farmers will be how many acres they will need to plant next year to bring these prices back in line," said Michael Swanson, chief agricultural economist for Wells Fargo & Co.

Said analyst Kluis: "The ending stocks are incredibly tight. I believe that they are the tightest forecasted on a stock-to-use ratio since 1973."

He said the report shows the need to cut exports by 150 million bushels.

"Year to date, U.S. farmers are producing about 90 million bushels above projections," Kluis said. "What you have is a very much shorter window to do the price rationing. That is creating a lot of volatility."

The USDA also predicted Friday that Brazil would surpass the United States in soybean trade this month to become the world's leading soybean exporter.

The fear that a lot of soybean farmers have is that large agribusinesses will import cheaper soybeans from Brazil, such as for hog feed, Swanson said.

For taxpayers, Kluis said, the USDA news is good. "There will be virtually no government subsidies going to farmers at this price level," he said Friday.

Jim Palmer, executive director of the Minnesota Soybean Grower's Association, said he was not surprised by the market's reaction.

"The report was lower than what the market was expecting," he said, "and that was just enough to throw fuel on the fire."

But, he said, farmers have to reap the crops to take advantage of the prices. In Minnesota, some are seeing an average harvest, others are not doing well.

"Right now, there's not many beans out there, and definitely not any cheap beans out there," Palmer said. "The market's going to be paying a good price for them."

Like Kluis, Palmer doesn't anticipate substantially higher consumer food prices. "We're going to have a short crop but not a shockingly short crop," Palmer said.

Minnesota produces about 9% or 10% of U.S. soybeans. More than 90% of soybean meal goes to livestock feed. Oil from soybeans provides the primary cooking and shortening oil in the United States.

Last year, Minnesota was the nation's third-largest producer of soybeans and corn. Soybeans are the leading crop of Minnesota farmers, followed by corn. Because of tighter supplies, live- cattle prices hit a record of 97 cents a pound on the Chicago Board of Trade Friday.

Corn is better

Farmers are now realizing that the hot, dry conditions during August did not have as much negative impact on corn yields as originally thought, the USDA said Friday.

Minnesota's corn crop probably will not break the 2002 record for the state. But the nationwide forecast, if realized, would be the largest ever for both production and yield, the USDA said.

In Minnesota, corn production is forecast at 951 million bushels, down 38.1 million bushels from the Sept. 1 estimate and down 101 million bushels from the 2002 record year, said Mike Hunst of the Minnesota Agricultural Statistics Service.

The Oct. 1 corn yield forecast is for 143.0 bushels per acre, down eight bushels from Sept. 1, and down 14 bushels from last year's record yield. Revised planted acreage is 7.2 million acres and harvested acreage for grain is 6.65 million acres.

With harvest underway, soybean yields are lower than last month in the Corn Belt and northern Great Plains, reflecting the impact of the hot, dry conditions in August and continued mostly dry weather during September, the USDA said.

However, excellent growing conditions continue to support higher yields in the Delta states, Kentucky and Tennessee, Hunst said.

Soybean production for Minnesota is forecast at 236.8 million bushels, down 40.7 million bushels from the Sept. 1 forecast and down 72.1 million bushels from the record production in 2002.

Based on Oct. 1 conditions, the soybean-yield forecast is 32 bushels per acre, down 5 bushels per acre from Sept. 1 and down 11.5 bushels from the record yield in 2002.

Revised planted acreage is 7.5 million acres and harvested acreage is 7.4 million acres for soybeans.

Nationally, corn production is forecast at 10.2 billion bushels, up 3% from the September forecast.

Soybean production is forecast at 2.47 billion bushels, down 7% from the September forecast, the USDA said.

Judging by conditions as of Oct. 1, soybean yields are expected to average 34.0 bushels per acre, down 2.4 bushels from September and down four bushels from 2002.

The USDA updated soybean acreage in several states and now the area planted is estimated at 73.6 million acres, down 68,000 acres from the August estimate.

Area for soybean harvest is forecast at 72.5 million acres, down 88,000 acres from September, but up fractionally from the 2002 acreage.

Corn production is forecast at 10.2 billion bushels, up 3% from last month and 13% above 2002.

Judging by conditions as of Oct, 1, yields are expected to average 142.2 bushels per acre, up 3.7 bushels from September and up 12.2 bushels from last year.

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