February 7, 2008

 

USDA expected to tighten soy carryout forecasts

 

 

A solid US export pace, with strong overseas interest in US soy, is seen tightening domestic carryout estimates in the US Department of Agriculture's February supply and demand tables.

 

The USDA's report is scheduled for release at 8:30 a.m. EST (1330 GMT) Friday. The average of trade guesses from the 15 analyst surveyed peg 2007-08 estimated ending stocks at 167 million bushels, an 8 million bushel reduction from January's forecast. The estimates ranged from 150 million bushels to 175 million bushels.

 

The consensus among analysts have the USDA fine tuning export figures in Friday's report, with domestic export projections bumped up amid a pick up in exports in January.

 

"After a lull during the holidays, soy export sales picked up during the first month of 2008," North America Risk Management Services analyst Jerry Gidel said in a market report. January export sales totalled 78 million bushels, keeping overseas demand 6 million ahead of last year and 69 million ahead of the seasonal pace to achieve the USDA's current export forecast of 995 million bushels, Gidel added in the report.

 

With only 148 million bushels of foreign purchases needed to achieve the USDA's current export forecast - the second lowest level for this date with 31 weeks left in the crop year except for 2003-04 - this year's export demand could be raised 15-20 million bushels, Gidel said.

 

Most analysts surveyed by Dow Jones Newswires were in agreement in regards to adjustments in exports, with Steve Freed, analyst with ADM Investor Services anticipating the USDA would trim the US carryout to 150 million bushels.

 

With early harvest delays already being seen in Brazil, and the fairly solid US export pace, it opens the door for the USDA to raise its export forecast and trim the carryout further, according to a research report from Iowa Grain Company.

 

In contrast, John Kleist of Kleist Ag Consulting sees demand for the products having more of an impact of the soy carryout, with strong demand for soyoil possibly increasing the USDA's crush forecast.

 

However, STA Trading Services analyst Roger Knapp, said the February report is usually a non-event and anticipates the USDA will hold off on tinkering with balance sheet items until after its outlook conference later this month.

 

On the world scene, analysts only anticipate minor adjustments to world balance sheets, with the potential for reduced production in Argentina, analysts said.

 

The most important figures to watch in the report will be South American production and their effects on the global balance sheet, according to a research report from Iowa Grain Company.

 

"The USDA is likely to lower Argentina's crop a little, based on crop estimates from Argentina's government," said Knapp.

 

Dry conditions through most of the growing season in parts of Argentina's soy belt could lead to a 1 to 2 million ton cut in output, Knapp added.