A drought that damaged crops in South America could send more overseas buyers to the U.S. for soybeans, the government said Tuesday.
The U.S. Agriculture Department on Tuesday cut its forecast for soybean inventories to 250 million bushels by the end of the growing season. It also raised its forecast for soybean exports by 15 million bushels to 1.29 billion bushels.
The agency also said that an early start to the planting season and softer demand from ranchers and ethanol producers could cause corn supplies to build by summer’s end. But for now, it’s leaving its forecast unchanged.
The drought in Brazil and Argentina earlier this year damaged soybeans and corn crops. The dry conditions reduced yields of both crops and should also create strong demand for U.S. corn, said Jason Ward, a commodities analyst with Northstar Commodity.
Soybean inventories already are tight in the United States and globally. U.S. farmers are expected to plant 73.9 million acres in soybeans this year, a decline of 1 percent from a year ago. Analysts say that could leave soybeans in very short supply by August 2013. Much depends on the size of the U.S. harvest this year.
Corn supplies have remained small because of strong demand from livestock producers and ethanol manufacturers. A mild spring allowed farmers to get an early start on planting. They are expected to plant 91.9 million acres in corn, the highest amount since 1937.
The strong demand and short supplies have kept corn prices above $6 a bushel for much of this year. That is expected to prompt ranchers to buy more wheat for livestock feed because it is cheaper and plentiful, the Agriculture Department stated.
The Agriculture Department has forecast: