US soybean acreage drops to 12-year low

The
tighter outlook for the 2007/08 supply raised the forecast of the national
average farm price this month to $7.25-$8.25 per bushel. Higher prices are
viewed curtailing US soybean exports in 2007/08 to 1.02 billion bushels from the
June forecast at 1.08 billion.

South American soybean stocks to pressure
US exports
Now that soybean harvests in Brazil, Argentina, and Paraguay have concluded, each country
has abundant stocks that need quick disposition.

In anticipation of potential price gains from any adverse summer
weather in the United
States, South American producers may not quite
finalize their crop sales.

By the last quarter of
this year, however, the soybean price level should be defined well enough to
rapidly accelerate the conclusion of farm marketing.

Unlike US producers, who have the advantages of greater crop storage,
delivery points, and a marketing loan program, South American farmers have fewer
incentives to hold stocks and will respond more directly to strong current
prices. Deliveries of South American soybeans to the export market should
strengthen considerably into early 2008.

In
Brazil, strengthening exchange rates
will also urge soybean farmers to sell. The projection of 2007/08 soybean
exports from Brazil, at 29.7 million tons, is 21
percent higher than the 2006/07 forecast.

Record crop in
Argentina
For Argentina, the estimate of 2006/07
soybean production was raised this month to a record 47.2 million metric tons
from 46.5 million. By October 2007, nearly 23 million tons is expected to remain
on hand from this bumper harvest.

Reducing the
soybean stocks next year toward a typical April carryover of around 1-2 million
tons implies that crushing and exports are capable of unprecedented strength
over the next 9 months.

Argentine soybean exports
are forecast to advance to 8.0 million tons for 2006/07 and 10.2 million for
2007/08. For the current year, slightly more soybean exports may arise due to
recent constraints on power use by Argentine processors.

Nevertheless, crushing could swell considerably into the first half
of 2007/08, and climb nearly 14 percent for the entire year to 38.5 million
tons.

Reduction in global stocks
The
expected tightening of soybean stocks in the United States, Brazil, and Argentina brings the projection of
2007/08 global ending stocks down to a 3-year low of 51.9 million
tons.

This would represent a 19-percent reduction
from the current year’s expected record.

Growth
in global soybean meal demand could be maintained by the expected rate of
soybean use. But soybean oil stocks could continue to tighten in 2007/08, with
demand likely to outpace production. Price gains for soybean oil next year would
be far stronger than for soybean meal.

More info:
USDA Oil crops outlook