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USDA Cuts Brazil Soy Crop, U.S. Stocks

As expected, the USDA slashed its estimate of Brazil’s soybean crop again in Thursday morning’s world supply/demand report and also cut Argentine production. Also, in a slight surprise for the soybean market, USDA lowered projected U.S. soybean ending stocks by 10 million bushels to 115 million bushels.

USDA pegged Brazil’s soybean crop at 56 million metric tons, down from a previous estimate of 59.5 million tons. The cut of 3.5 million tons was slightly larger than most observers expected, but should not be a surprise for the market with most estimates out of Brazil already lower.

USDA pegged Argentina’s crop at 35 million tons, down 1.5 million tons from its previous estimate. That is slightly bullish for prices as trade analysts had generally been looking for a 1-million-ton cut.

On the U.S. supply/demand balance sheet, the 10-million bushel cut in ending stocks was the result of 10-million bushel increases in both the projected crush and exports and a cut in residual use.

USDA also raised its projected range for the average on-farm price of soybeans to $7.40-$7.80 from $7.15-$7.55.

Not all the news in the report was bullish. Besides cutting South American production and U.S. ending stocks, USDA also cut its projection of world soybean usage by 2.37 million metric tons, dropping exports by 2.23 million tons, to reflect the effects of rising prices.

While the lower usage partially offset the supply cuts, USDA still lowered projected 2003-2004 world soybean ending stocks by 8% to 33 million tons.

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.