December 17, 2003



USDA Raise Soybean Price Forecast for 2003 -04


The US Department of Agriculture (USDA) raised its forecast for 2003-2004 soybean prices in a report on world agricultural supply and demand estimates.


In the report, the USDA left unchanged its estimate of U.S. soybean ending stocks for the 2003-2004 marketing year at 125 million bushels, the smallest soybean supplies since 1976-1977.


Trade analysts were expecting about an 8-million-bushel reduction in soybean ending stocks due to the strong pace of U.S. soybean exports since the beginning of the 2003-2004 marketing year on September 1.


China, in particular, has increased its U.S. soybean purchases by more than 100 percent compared to last year, accounting for nearly 40% of the 2003-2004 U.S. soybean export sales.


However, with U.S. soybean ending stocks already projected at a 27-year low, the U.S. soybean markets may need to raise prices to ration export demand, analysts said.


"You can't really go much under 120 (million). That would take us below pipeline supplies," said Dan Roose of U.S. Commodities in West Des Moines.


Bill Nelson, an analyst at AG Edwards & Sons, said: "We don't see it as a big deal if it (soybean ending stocks) remained unchanged. But the market may see it as a bit bearish."


The USDA expects 2003-2004 U.S. soybean prices to average $6.85 to $7.65 per bushel, up from its November estimate of $6.65 to $7.65 per bushel.


In addition, the USDA raised its forecast of average U.S. corn prices for the 2003-2004 marketing year to $2 to $2.40 per bushel, compared to last month¡¯s estimate of $1.90 to $2.30 per bushel.


The price increase reflects the larger-than-expected U.S. corn exports during the first quarter of the 2003-2004 marketing year. In its report, the USDA raised projected MY 03-04 U.S. corn exports by 50 million bushels to 1.925 billion bushels, up from last year's 1.59 billion bushels.


The USDA also lowered its forecast of 2003-2004 U.S. corn ending stocks by 50 million bushels to 1.299 billion bushels.


"Projected corn exports are 50 million bushels larger than last month due to less competition from Argentina, the stronger-than-expected pace of corn export sales to date and recent sales made to non-traditional markets (Malaysia and Indonesia)," the USDA said.


Dry weather in Argentina, the world's third-largest soy producer, also reduced the country's expected soybean crop during the 2003-2004 marketing. The USDA forecast Argentina's soybean production at 36.5 million metric tons (1.34 billion bushels), down 1.5 million tons from last month's estimate.