Soybeans hit 28-month high

Hot, dry weather threatening crops in Argentina, a major exporter, drove U.S. soybean futures near 28-month highs Monday.

Soybeans for January delivery reached $13.78 1/2 a bushel at the Chicago Board of Trade, the highest price for a front-month contract since September 2008. The nearby contract closed up 23 1/2 cents, or 1.7%, at $13.73. Soybeans for March delivery climbed 24 1/2 cents, or 1.8%, to $13.84 1/2 a bushel.

Leading prices higher were worries about harsh weather reducing output in Argentina, the world's third-largest exporter of soybeans and the leading exporter of soy products. Rains won't bring relief to farmers for at least the next 10 days, said Drew Lerner, president of World Weather Inc., a private weather firm.

"It's just dry and hot," he said. "It'll be pretty darn nasty."

Market participants are nervous about the potential for crop damage after heat and dryness slashed output two years ago. Argentina produced 32 million tons of soybeans in 2008-2009, down from 46.1 million in 2007-2008 and 54.5 million in 2009-2010, according to U.S. government data. Earlier this month the U.S. projected Argentina's 2010-2011 soybean crop at 52 million tons. It will be harvested in the spring.

"After two years ago, you have to be gun-shy on Argentina," said Jerry Gidel, analyst for North America Risk Management Services, a Chicago commodities brokerage firm.

Traders shrugged off poor weekly U.S. soybean export inspections of 23.3 million bushels, which were well below analysts' estimates for inspections of 35 million to 40 million. Overall demand for U.S. soybeans remains strong, analysts said. Export commitments for U.S. soybeans as of Dec. 16, 16 weeks into the crop's marketing year, were 79% of the government's target for the year, above the five-year average of 64%.

"The demand side of the market is signaling that people are buying some U.S. beans as insurance against continuing dry weather in Argentina," said Tim Hannagan, analyst for PFG Best, a commodities brokerage firm in Chicago.

Concerns about Argentina's crop shoved U.S. soy product futures higher. CBOT March soymeal closed up $6.90, or 1.9%, at $370.30 per short ton. CBOT March soyoil closed up 0.52 cent, or 0.9%, at 57.75 cents per pound.

Export business could shift to the U.S., the world's leading soybean exporter, if Argentina's crops fall short. Poor weather may reduce the crops' ultimate yield potential or discourage farmers from finishing planting soybeans, which are about three-quarters sown, analysts said.

The Buenos Aires Cereals Exchange on Thursday trimmed its soybean planting estimate by 1% to 18.5 million hectares and warned that fields in southern areas "need showers soon, or will suffer considerable deterioration." A hectare equals about 2.5 acres.