Tuesday morning’s USDA supply/demand report should be moderately friendly for corn and soybean prices as the agency cut its U.S. carryout estimates for both crops by more than the average of trade expectations.

USDA cut its 2009-2010 U.S. soybean carryout estimate by 35 million bushels to 210 million bushels compared with trade estimates averaging 219 million bushels in a range from 170-245 billion.

U.S. corn ending stocks were pegged by USDA at 1.719 billion bushels, down 45 million bushels from its January estimate and toward the lower end of trade estimates that averaged 1.748 billion bushels in a range from 1.602 billion to 1.815 billion.

USDA raised projected U.S. soybean exports by another 25 million bushels to a record 1.400 billion bushels and now sees exports rising 117 million bushels or 9.1% from the 2008-2009 level.

USDA also raised its U.S crush projection by 10 million bushels to 1.720 billion bushels and now sees the 2009-2010 crush running 3.5% larger than a year earlier.

The department raised projected U.S. soybean exports despite raising Brazil’s soybean crop by another 1 million bushels to 66 million bushels based on a higher crop estimate from Brazil’s agriculture ministry.

The increase in Brazilian production was more than offset by a decrease in the estimate of Brazil’s old-crop ending stocks.

Strong Chinese demand is seen offsetting record production in the U.S. and South America. USDA raised its estimate of China’s 2009-2010 soybean imports by another 500,000 metric tons to 42.5 million tons.

Despite reducing its U.S. carryout estimate, USDA cut its projection for the average U.S. on-farm price of soybeans to $8.70-$10.20 from the previous range of $8.90-$10.40 based on the substantial drop in soybean prices during January.

The biggest change on the U.S. corn balance sheet was that USDA raised its estimate of corn for ethanol use by 100 million bushels to 4.3 billion bushels.

USDA said the increase reflected record ethanol production during the first quarter of the marketing year and continued profitable conditions for ethanol producers.

On the other hand, USDA cut its estimate of 2009-2010 corn exports by 50 million bushels due to expectations for increased export competition from Argentina.

USDA raised its estimate of Argentina’s corn crop to by 2.2 million metric tons to 17.2 million tons and raised Argentina’s projected exports by 1.2 million tons. USDA did not raise its estimate of Brazil’s crop, even though the Brazilian agriculture ministry boosted its estimate.

Despite the larger Argentine crop, USDA cut its projection of world corn ending stocks to 134.04 million tons from 136.19 million tons due to increased usage in the U.S. and overseas. Projected world corn usage rose by 3.44 million tons to 809.67 million tons.

USDA narrowed its projection for the average U.S. on-farm price of corn to $3.45-$3.95 from the previous $3.40-$4.

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.