The drought in Argentina, coupled with robust Chinese demand, should see US soybeans stocks fall within touching distance of a 3.1m tonne low reached five years ago, traders believe.

Market forecasts predict that the US Department of Agriculture's May report on global supply and demand, released later on Tuesday, will show a drop of about 1m tonnes in America's soybean stocks at the end of the current season.

The April report pegged soybean stocks ending the 2008-09 season, which closes in August, at 4.48m tonnes.

Traders' expectations have been informed by news of worsening troubles with Argentina's parched soybean crop and continued strength in shipments to China, which have driven Chicago soybean prices to their highest since September.

However, the market believes there will be sharp recovery in US soybean stocks next year, with the USDA's first estimate on 2000-10 inventories  - which will also be released in Tuesday's report - expected to come in at about 6.3m tonnes.

Weaker wheat

For corn, the market is forecasting a cut of about 500,000 tonnes in US stocks at the end of the 2008-09 marketing year, only a small change compared with the 43.2m tonne figure noted in April's report.

The report is expected to show inventories ending the 2009-10 year at about 33m tonnes.

For wheat, traders are expecting only minimal amendments to the USDA's 19.0m tonne estimate for stocks at the close of the grain's 2008-09 season.

However, the market believes the report will show output from the forthcoming harvest dropping by up to 11m tonnes to about 57m tonnes thanks to weak winter wheat crop yields.

Production of winter wheat, which has been plagued in some states by dry weather and frost, will be pegged at less than 42m tonnes, some 9m tonnes below the 2008 crop, traders predict.