Estimates of record soybean production in the world could lend a bearish lean to the soybean market in the coming months, according to a market analyst speaking at a Chicago Board of Trade press briefing on USDA's June 10 crop production and supply/demand estimates. Meanwhile, anything less than a record U.S. corn crop could turn the market into a powder keg, another analyst says.

For the 2004-05 season, USDA is forecasting a world crop of 225 million tons, including record crops for the United States and two South American countries. Brazil production is expected to reach 66 million tons, up from 52.6 million tons in 2003-04. Argentina production, projected at 39 million tons, is up from 34 million tons last year.

World numbers in soybeans “are pushing the pendulum toward a bearish attitude,” said Terry Roggensack, grain specialist, Hartfield Management, Inc. “World ending stocks for 2003-04 are swelling to 46.69 million tons.”

USDA estimates 2004-05 U.S. soybean ending stocks at 220 million bushels, up from last month's estimate of 190 million bushels. USDA's new crop corn ending stocks estimate was unchanged from last month's 741 million bushels.

“There was also a potential for 2003-04 soybean ending stocks to drop even further than the 115 bushels listed last month, which was a 27-year low,” Roggensack noted. “USDA chose not to do that and left ending stocks unchanged.”

While there is a short-term concern about a reduction in demand from China and concerns about the country's credit situation, USDA pushed China's soybean import forecast for 2004-05 to 24 million tons.

“By USDA's thinking, this means China will get back on track as a big bean importer in 2004-05, noted Allen Dever, senior economist with Doane Agricultural Services. “But this has to trade against the larger South American crops.”

If South America achieves its record yields in 2004-05 “and we get a large U.S. crop, then soybeans have a good deal of downside risk,” Dever said.

USDA left U.S. corn production and use unchanged from last month. World ending stocks are still very tight. “The big question in the world corn market is the size of the U.S. crop,” Dever said. “With our demand so strong, we simply have to have a record corn yield, or the world grain supply/demand situation is a powder keg.”

Weather does appear to be on track to deliver a record U.S. corn crop, according to Roggensack. “But the trade will not assume those record yields until we get closer to pollination. So the market is likely to hold support at $2.87 for the next couple of weeks, with good resistance at $3.17.

“From a technical perspective, November beans support is from $6.59 to $6.40 — unless we get some type of a weather scare to be concerned about the potential for record-type yields.”

The outlook will become clearer when USDA issues its acreage report at the end of June, according to Dever. “Corn and wheat will break out of a sideways trading pattern after that, depending on the report and how the weather shapes up in July. Soybeans will tend to maintain a bit of a downward bias until the middle of July, until we know whether or not the crop will live up to expectations.”

USDA forecast U.S. wheat production at 1.53 billion bushels, down from last year's estimate of 1.55 billion bushels. But this month's estimate could be too conservative. “We're going to lose a fair amount of wheat in Kansas, Colorado and Nebraska,” Dever added.

Wheat's ending stocks figure of 495 million bushels is down from last month's estimate of 499 million bushels.

USDA's projections for the U.S. cotton situation for 2004-05 remained unchanged from last month. World production is projected at a record 102.9 million bales, marginally above last month. Production is projected 10 percent above the 2003-04 season, due mainly to increases for China, Australia, Pakistan, and Brazil, which are partially offset by decreases for India and the United States.

World consumption is projected at 99.9 million bales, 1 percent above last month and 1.3 percent above 2003-04.

Continued strong growth in China's textile activity is driving the year-to-year increase in world consumption, as consumption in the United States and in many foreign countries outside China is projected to decline.

World trade is raised slightly from last month. Global stocks are projected to rise 10 percent from the 2003-04 level.

USDA did not make major changes in U.S. supply and use estimates for rice for 2004-05. World production is projected at 399.8 million tons, down nearly 2 million tons from a month ago, but up 11.5 million tons from 2003-04.


e-mail: erobinson@primediabusiness.com