Soybeans Rise to Eight-Month High as China Demand Erodes Supply

May 27 (Bloomberg) -- Soybeans rose to an eight-month high as record imports by China, the world’s biggest consumer of the commodity, erodes inventories held in the U.S., the largest grower and exporter.

Imports may exceed 4.5 million metric tons this month, reach 4.2 million tons in June and exceed 3 million tons in July and August, the China National Grain and Oils Information Center said today in a statement. The country imported a record 13.9 million tons in the first four months of the year, according to the customs office. Soybean prices are up 21 percent this year.

“The Chinese are committed to increased imports to build reserve inventories,” said Tim Hannagan, a grain analyst for Alaron Trading Corp. in Chicago. “The function of the market is to ration remaining supplies, and that may require a much bigger rally” to slow demand, he said.

Soybean futures for July delivery rose 1.5 cents, or 0.1 percent, to $11.87 a bushel on the Chicago Board of Trade, after earlier touching $12.0075, the highest for a most-active contract since Sept. 25.

China is aiming to stockpile 7.25 million tons of soybeans by the end of June, an amount close to half of the country’s output. Corn, rapeseed and rice inventories also are being increased by the government to bolster domestic farm incomes, which have dropped as the global recession crimped demand.

U.S. inventories on Aug. 31, before this year’s harvest, will drop to a five-year low of 130 million bushels from 205 million bushels a year earlier, the USDA said May 12.

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