USDA Slashes U.S. Soybean Carryouts

As expected, USDA has slashed its estimates of both 2001-2002 and 2002-2003 U.S. soybean ending stocks significantly due to continued stronger-than-expected usage and the lower-than-expected plantings shown by the June acreage survey.

USDA supply/demand report pegged 2001-2002 ending stocks at only 210 million bu, down from the June estimate of 240 million. The cut reflected further increases of 25 million bushels in projected soybean exports and 5 million bushels in the expected soybean crush.

USDA cut its projection of 2002-2003 soybean ending stocks to 230 million bushels from 265 million, reflecting the drop in the projected carry-in and a 10-million-bushel cut in expected 2002 production.

USDA lowered soybean plantings back to 73 million acres from its June estimate of 73.5 million and cut expected harvested acreage by 200,000. USDA is still using trend-line yields, so this report does not reflect any possible adverse effect on the crop from hot, dry weather.

The stocks numbers certainly should be friendly for the market, but were not unexpected. The tightening of stocks should make the market extremely sensitive to weather from here on out since a swing of 1 bu either up or down from the trend-line yield would have major consequences for U.S. supply levels.

All the news for soybeans is certainly not positive. While USDA's U.S. supply/demand numbers are bullish, its numbers for South America are bearish. USDA sees the U.S. share of export trade dropping considerably in 2002-2003 due to big South American production.

USDA's first 2002-2003 crop estimate for Brazil pegs production there at 47 million metric tons, up 8%. USDA again left its estimate of Brazil's 2001-2002 crop at 43.5 million tons, even though almost all estimates out of Brazil are at 42 million tons or lower.

USDA's first estimate for Argentina's 2002-2003 crop is 30 million metric tons, up from an unchanged estimate of 29.5 million tons for this year.

USDA also raised estimates soybean stocks for Brazil. The bottom line is that despite the cut in U.S. stocks, USDA now sees 2001-2002 world ending stocks at 30.52 million tons, up from a June estimate of 29.43 million. World 2002-2003 stocks are seen dropping only slightly to 29.37 million tons.

Editors note: Richard Brock, 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.