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Bean Prices Rise But For How Long?

posted on October 31, 2003

Hello, I'm Mark Pearson.

For weeks now, a feeble job market has prevented officials from declaring the economy is in full recovery. And yet there were more signs this week that it may be time to make such a declaration.

The government reports that the U.S. economy grew at a red-hot 7.2 percent in the third quarter. That's the fastest pace in nearly two decades. In addition, consumer confidence is on the rebound, and orders for big ticket items such as cars also are on the rise.

Against that backdrop, many mutual fund firms are enjoying strong quarterly earnings, thanks to growing investor optimism and steadily rising markets.

The bulls are upbeat in the commodity markets, as well. That's especially true in the soy complex, where the questions are: how high and how long?


Bean Prices Rise But For How Long?

First-year students in basic economics would have little trouble explaining the run up in soybean prices: It's a classic case of supply and demand.

Soybeans surged to fresh contract highs yet again this week, with the January contract cracking the $8.05 level at midweek. Nearby beans also broke through the $8.00 mark.

The impetus behind the latest surge in prices has been a massive buying spree by the Chinese. Brisk economic growth in China has prompted private analysts to raise Chinese soybean imports in the current marketing year as high as 24 million metric tons. That's 3.5 million tons above USDA's forecast.

Most of those imports are coming from U.S. supplies, as the Chinese seem uncertain about South America's ability to deliver beans later in the season.

About 20 percent of the Brazilian soybean crop will be planted by week's end. But dry weather conditions have limited planting progress in Argentina, where only 2% to 3% of the crop is in the ground.

The primary sellers in the market have been U.S. farmers who held onto their beans when prices topped $7.00 earlier this month. But of the supply still available, many farmers have fewer than normal beans left to sell because of small yields.

Where will it end? Some analysts predict the market will peak just ahead or just behind USDA's November 12th crop report.


Tags: agriculture crops markets news