USDA unexpectedly raised its estimates of 2008 U.S. soybean production and ending stocks on Monday morning, surprising the market, which had expected a further cut in both production and stocks.

The increase in 2008 soybean production was partially offset by stronger projected usage due to continued strong exports to China, however, USDA further reduced its forecast of the U.S. domestic soybean crush.

USDA raised its estimate of the 2008 U.S. soybean crop by 49 million bushels to 2.959 billion bushels, increasing the national average yield by 0.5 bu. to 39.6 bu./acre. Trade soybean crop estimates averaged 2.910 billion bushels in a rage from 2.879 to 2.940 billion bushels.

Dec. 1 soybean stocks were pegged by USDA at 2.276 billion bushels, compared with trade estimates averaging 2.181 billion bushels in a range from 1.973 to 2.238 billion bushels.

USDA raised its projection of 2008-2009 U.S. soybean ending stocks by 20 million bushels, or 9.8%, to 225 million bushels. Pre-report trade estimates of soybean ending stocks averaged 186 million bushels.

USDA raised projected soybean exports by 50 million bushels, but cut the projected U.S. crush by 30 million bushels. USDA now pegs the U.S. soybean supply/use ratio for 2008-2009 at 7.6%, up from 6.7% last year. USDA narrowed its projected range for the 2008-2009 average on-farm soybean price to $8.50-9.50 from a previous forecast of $8.25-9.75.

The corn market received a one-two punch of bad news from USDA on Monday morning in the form of a larger 2008 production estimate and a much larger-than-expected Dec. 1 stocks figure that implied slower-than-expected usage.

USDA raised its estimate of 2008 U.S. corn production by 81 million bushels to 12.101 billion bushels, increasing the national yield by 0.1 bu. to 153.9 bu./acre. Trade crop estimates averaged 11.982 billion bushels in a range from 11.880 to 12.078 billion.

USDA’s Quarterly Grain Stocks Report pegged Dec. 1 U.S. corn stocks at 10.084 billion bushels, well above trade estimates that averaged 9.845 billion bushels in a range from 9.699 to 9.998 billion bushels.

As a result, in its monthly supply/demand update, USDA raised its projection of the 2008-2009 corn carryout to 1.790 billion bushels, up 316 million bushels or 21.4% from its previous estimate. Pre-report trade expectations for corn ending stocks averaged 1.489 billion bushels.

USDA cut projected U.S. corn usage in all categories, trimming another 100 million bushels off projected use of corn for ethanol production and 35 million bushels off other forms of industrial use. Projected feed/residual use was trimmed by 50 million bushels and projected exports were cut by another 50 million bushels.

Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.