Soybeans Rise to Seven-Month High as China May Reduce Acreage

May 20 (Bloomberg) -- Soybean prices rose, extending a rally to a seven-month high, on speculation that China’s crop will shrink, boosting demand for dwindling U.S. supplies.

Farmers in Heilongjiang province, China’s biggest soybean producer, may reduce the area sown with the oilseed by 6.4 percent to plant more corn, Cao Zhi, an analyst at the state- backed China National Grain and Oils Information Center, said today. Reserve U.S. inventories will reach a five-year low before the next harvest, the government said last week.

“It is another bullish piece of news” in China, said Chad Henderson, an analyst at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. “The tight supply of soybeans will keep the market well-supported on hints of any new Chinese buying.”

Soybean futures for July delivery rose 7 cents, or 0.6 percent, to $11.69 a bushel on the Chicago Board of Trade, the third straight gain. Earlier, the price touched $11.895, the highest for a most-active contract since Sept. 26.

The total soybean area in China, the world’s largest importer of the oilseed, may fall 3.7 percent, the Grain and Oils Information Center said on May 8. The Asian nation will harvest 15.6 million metric tons this year, down 2.5 percent from last year, the U.S. Department of Agriculture said May 12.

Global soybean exports to China will rise 1.6 percent to 38.1 million tons in the marketing year that begins Oct. 1, up from a record 37.5 million this year, the USDA forecast.

High Demand

Demand for U.S. soybeans to move to export terminals near New Orleans and in the Pacific Northwest remains high because China is increasing imports to build reserves and boost production of animal feed and vegetable oil, Henderson said.

China may import more than 4 million tons in May, up from 3.71 million in April and 3.48 million tons a year earlier, the Grain and Oils Information Center said yesterday.

On May 18, Xinhua News reported that the government would buy an additional 1 million tons of soybeans from Heilongjiang province to add to state reserves. The country aims to stockpile 7.25 million tons, close to half of domestic output, by the end of June.

The market is “responding to the tight old-crop U.S. soybean supplies,” Anne Frick, a senior oilseeds analyst for Prudential Financial Inc. in New York, said today in a report to clients. July futures may rise to $12.18 a bushel “in an environment of still-large purchases by China,” Frick said.

Soybeans are the second-biggest U.S. crop, valued at $27.4 billion in 2008, behind corn at $47.4 billion, government figures show.