Traders and soybean farmers were shocked by the projections made at USDA's annual Outlook Conference in Washington, DC, in late February.

The USDA projection called for a near-record 71.5 million acres and a national yield of 39 bu/acre. This combination of acreage and yield would result in a record crop of 2.78 billion bushels next fall.

The USDA price forecast: cash bids at just $5.25 by next fall.

Of the two variables, acreage and yield, I feel the yield projection will be the most difficult to attain.

At NorthStar, we're projecting 70-71.5 million acres of planted soybeans in 1998. Acreage could drop to less than 70 million if the Midwest has a normal or early spring and could jump to over 72 million with a late spring.

The USDA Soybean Yield Time Series chart suggests a median yield of 36 bu/acre this year (see printed article). I believe that's more realistic, especially considering where the acreage increase will occur.

Most of it will be in five western states - North Dakota, South Dakota, Nebraska, Kansas and Oklahoma - where soybeans will replace wheat on some acres. These are also states that have a lot of land coming out of the Conservation Reserve Program this year.

If soybean acreage increases by 1.5-2 million in these states, it will take very good weather throughout the Upper Midwest for a 39-bu average yield to develop. Although western states have had above-average yields since 1994, they've had the greatest yield variability over the last 20 years.

With the trade building in a record crop and $5.25 soybeans for next fall, a lot of negatives are already built into the markets.

So stay disciplined and make scale-up sales during rallies, but avoid panic sales when prices drop. Any acreage or weather surprises this spring or summer could take soybean prices sharply higher.

If you sell soybeans ahead, use a combination of hedges and puts. The last time the outlook was this bad - the spring of 1983 - prices were a lot higher by fall.

Tuesday, Mar 31, was a critical day for soybean farmers. USDA was scheduled to release its quarterly Grain Stocks Report and the Prospective Planting Report at 7.30 a.m., CST, that day.

For our analysis of these reports, visit us at www. north-star-commodity.com