Soybeans Fall on Speculation Slumping Economy to Curtail Demand

By Jeff Wilson

Oct. 28 (Bloomberg) -- Soybeans fell after a report showed that U.S. consumer confidence tumbled to the lowest level ever in October, signaling a drop in spending and dwindling demand for animal feed and biofuel made from the oilseed.

The Conference Board index plunged to 38, lower than forecast. Earlier, soybeans surged as much as 6.9 percent after the U.S. Department of Agriculture reduced its crop forecast because of errors in acreage estimates. The slumping global economy will curtail oilseed use, said Dan Cekander, a senior grain analyst for NewEdge USA LLC in Chicago.

``There is a complete doubt about demand,'' Cekander said. ``You are going to have to prove demand won't fall off.''

Soybean futures for January delivery fell 9.5 cents, or 1.1 percent, to $8.88 a bushel on the Chicago Board of Trade. Earlier, the price reached $9.59, the highest since Oct. 9. The most-active contract is down 46 percent from a record $16.3675 on July 3.

Soybeans are the second-biggest U.S. crop, valued last year at $26.8 billion, government figures show. Corn is the largest at $52.1 billion.

The soybean harvest will be 2.938 billion bushels, down 1.5 percent from the Oct. 10 forecast, the USDA said. Reserve inventories before next year's harvest were projected at 205 million bushels, down from 220 million estimated this month.

Prices also fell as the dollar climbed, limiting the purchasing power of overseas buyers. The dollar rose to the highest since April 2006 against a basket of six major currencies.

The 27-nation European Union bought 13 percent of last year's U.S. soybean harvest. Exports accounted for 43 percent of the 2007 crop, USDA data show.

U.S. Exports

Exports will be 1.02 billion bushels, down from 1.05 billion estimated Oct. 10 and up from 1 billion forecast in September, the USDA said today. The U.S. exported 1.16 billion bushels in the year that ended Aug. 31.

``The dollar rally is the most bearish story for soybeans,'' said James Gerlach, president of A/C Trading Co. in Fowler, Indiana.

Soybean meal, an animal feed produced from soybeans, fell 3.4 percent, the most in two weeks, on speculation that demand from poultry producers will wane, analysts said.

The shares of Pilgrim's Pride Corp., the largest U.S. chicken producer, have plunged after the company forecast a ``significant'' loss in the quarter ended Sept. 27. The company's lenders agreed to extend a temporary waiver of some conditions of credit agreements to provide liquidity through Nov. 26.

Chicken production in the nine months ended Sept. 30 rose 4.4 percent from a year earlier, government data show. The wholesale price of boneless chicken breast has dropped 16 percent from a year ago, USDA data show.

``People are increasingly worried about the poultry industry,'' said Michael Mock, an agricultural-risk specialist for Andersons Inc. in Maumee, Ohio. ``It will take time to rebuild the industry.''

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.