Record U.S. soybean crop seen extending bear market

Price Cure

“The cure for high prices, as the commodities-market adage goes, is high prices,” Greg Page, the chief executive officer of Cargill Inc., wrote in a column for Bloomberg View on May 30. The Minneapolis-based company dominates U.S. grain handling along with Bunge Ltd. and Archer-Daniels-Midland Co. U.S. farm income rose 14% to $128.2 billion last year as prices surged and insurers made record payouts for ruined fields.

Global food costs retreated for the first time in four months in May, the United Nations’ Food & Agriculture Organization estimates. Prices are now 9.5% below the record reached in February 2011, the Rome-based agency says.

Rising prices for U.S. supply will drive more buyers to South America, said Doug Jackson, a vice president at INTL FCStone Inc. in West Des Moines, Iowa. Shipments from New Orleans cost $1.265 a bushel more than in Paranagua, Brazil on June 7, according to data from the USDA and Sao Paulo-based broker Ary Oleofar Corretora de Mercadorias. They were at a 15- cent discount a year ago.

Export Cancellations

U.S. exporters reported more cancellations than new sales in three of the past seven weeks and shipments are at their lowest for this time of year since 2004, USDA data show. China, the biggest buyer, imported 3.4% less in May than a year earlier and has been canceling purchases from the U.S. for delivery before Aug. 31 as it shifts purchases to cheaper supplies in South America. Brazil’s shipments were a record in May, customs data show.

“The pace of Brazilian exports is very strong and will slow demand for U.S. soybeans,” said Anne Frick, the senior oilseed analyst for Jefferies Bache in New York. “We have plenty of global supplies.”

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