Projected Soy Carryout Up Sharply

The soybean market got a double dose of bearish news from USDA Jan. 12 when the agency raised its estimate of U.S. 2005-06 ending stocks by 100 million bushels, or nearly 25 percent, and also raised its estimate of world ending stocks by about 10.5 percent.

The soybean market was expecting a sizeable increase in the U.S. stocks projection, but few people thought it would be that large. USDA pegged soybean ending stocks at 505 million bushels compared with its December estimate of 405 million bushels and trade estimates averaging 453 million bushels in a range from 405-525 million bushels.

Projected world ending stocks were raised to 53.15 million metric tons (1.953 billion bushels). In addition to raising U.S. stocks, USDA raised Brazil’s projected ending stocks by 1.88 million metric tons due to larger production. The size of Brazil’s 2004-05 soybean crop was boosted to 53 million metric tons from 51 million. Projected ending stocks for Argentina were also raised again.

At 505 million bushels, U.S. soybean ending stocks would be larger than in any other year on record except 1985-86 when they reached 536 million bushels.

Much of the increase was due to the continued slow pace of U.S. soybean export sales, as projected 2005-06 exports were cut by 70 million bushels to 950 million bushels. The new export estimate represents a drop of 13.9% from the previous year’s exports of 1.103 billion bushels.

The 2005 U.S. soybean crop estimate was also raised another 43 million bushels to 3.086 million bushels, which compared with trade estimates averaging 3.065 billion bushels in a range from 3.020-3.100 billion. The U.S. average soybean yield was bumped up to 43.3 bushels per acre from the November estimate of 42.7 bushels.

The Quarterly Grain Stocks report put Dec. 1 soybean stocks at 2.502 billion bushels, up 197 million bushels, or 8.5 percent, from a year earlier and above the high end of the range of trade estimates.

That stocks figure implies first quarter U.S. soybean usage of 844 million bushels, down from 937 million bushels during the first quarter of 2004-05. Stronger-than-expected export competition from South America was largely responsible for the slower usage.

The good news is that even with the large increases in projected ending stocks, USDA raised its projected range for the U.S. on-farm average price of soybeans to $5.10-$5.80 from $5.00-$5.70.

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

To see more market perspectives, visit Brock's Web site at www.brockreport.com.