Soybeans Rise to 2-Month High on Lower U.S. Inventory Forecast

April 9 (Bloomberg) -- Soybeans rose to the highest price since January after the government said U.S. inventories will drop to a five-year low before this year’s harvest.

Supplies on Aug. 31 will fall to 165 million bushels, down from 185 million projected in March and 20 percent less than pre-harvest inventories in 2008, the U.S. Department of Agriculture said today in a report. Demand for U.S. exports improved with the smaller harvest expected in Argentina, which the USDA estimates will produce 39 million metric tons, down from 43 million forecast last month.

“The U.S. is picking up the slack from the falling production in Argentina,” said Christopher Narayanan, the managing director of research at Advance Trading Inc. in Bloomington, Illinois. “USDA tightened up the balance sheet and it could tighten further” without any slowdown in exports, Narayanan said.

Soybean futures for May delivery rose 1 cent, or 0.1 percent, to $10.07 a bushel on the Chicago Board of Trade, after earlier jumping as much as 2.5 percent to $10.3075, the highest since Jan. 26. The price gained 1.2 percent this week, the fourth increase in five weeks.

Global soybean production will total 218.8 million tons, 2 percent less than the 223.3 million forecast a month ago, largely because of lower planted acreage and drought-curbed yields in Argentina, the USDA said.

World inventories on Sept. 30 will be 45.8 million tons, less than the 49.95 million forecast in March and down from 53.1 million tons a year earlier, the USDA said.

Equity Rally

Prices also rose as stock markets rallied around the world, after Wells Fargo & Co. reported better-than-estimated earnings and as speculation American banks will pass government stress tests boosted confidence in the financial system. Crude oil gained the most in a week, boosting investor demand for alternative assets as a hedge against inflation.

“Stocks are rising and crude oil is up, which helps to attract new speculative buying” in agricultural commodities, including soybeans, said Mark Schultz, a vice president for Northstar Commodity Investments LLC in Minneapolis. “The outside markets only add to the bullish supply and demand news.”

Soybeans are the second-biggest U.S. crop, valued in 2008 at a record $27.4 billion, government figures show. Corn is the biggest at $47.4 billion.