Increased exports are driving up prices of U.S. soybeans and the situation may persist until this fall or beyond. USDA's World Agricultural Supply and Demand Estimate report released Tuesday increased U.S. exports for 2011/2012 to 1.29 billion bushels.

Soybean and soybean product prices are all projected higher this month, according to the report. The report raises its U.S. season-average soybean price range forecast to $12.00 to $12.50 per bushel compared with $11.40 to $12.60 last month.

Pork producers will also likely pay more for soybean meal. The report raises its projected price range to $335 to $355 per short ton.

“The problem for soybean complex consumers is that export demand will absorb record levels of U.S. soybean production, and the potential demand will be so robust that it will likely stretch the limits of shipping capacity next fall,” according to Bill Nelson, soybean analyst for Doane.

The USDA report also lowered its estimate for South American soy production. According to report estimates, Brazil soybean production is forecast at 66 million tons, down 2.5 million tons from last month, due to warm temperatures and a lack of rainfall since late February.

“Potential demand calculates to levels that exceed the likely production under normal weather,” says Nelson. “Record yields, which are no more certain than normal or below average yields, could compensate some for an acreage shortfall.” Another scenario is that soybean prices rally enough this spring to attract far more acres to soybeans than indicated by the March 30 Prospective Plantings estimate, adds Nelson.

USDA releases its forecast for the 2012/2013 season May 10. “This year, there will be much attention focused on expected upward adjustments to demand associated with anticipated reductions in the USDA forecasts for Brazil and Argentine production,” Nelson says.

Read the full report.