soybean stalks

USDA has reduced its projected ending stocks for soybeans as well as for corn and wheat to reflect strong demand and tightening supplies.

The USDA's December 11, 2007 World Agriculture Supply and Demand Estimates (WASDE) report reduced 2007-08 corn, soybean and wheat projected ending stocks. No changes were made to production estimates, but strong demand continues to tighten supplies in spite of higher prices.

Corn 2007-08 export projections were increased 100 million bushels to 2.450 billion bushels. This resulted in a 100 million bushels decrease in projected ending stocks from 1.897 to 1.797 billion bushels. World corn carryover was reduced slightly from 110.39 mmt to 109.06 mmt because the decrease in US ending stocks was partially offset by small adjustments to foreign production and use estimates.

Expected 2007-08 corn prices were adjusted upward by fifteen cents and are now expected to range from $3.35 to $3.95. This increase was based on reported prices to date along with higher futures and cash prices.

The soybean crush estimate was increased at five million bushels and export projections were increased 20 million bushels. This produced a 25 million bushels reduction in expected 2007-08 soybean ending stocks from 210 million bushels (November) to 185 million bushels (December). The current ending stocks estimate represents a 68 percent decline from the previous year's soybean carryover.

The lower US carryover, along with minor adjustments to foreign production and use, resulted in a slight decrease in expected world soybean ending stocks from 49.35 mmt to 47.32 mmt.

Soybean price forecasts were increased seventy-five cents, due to recent sharply higher futures and cash prices. Soybean prices are expected to range from $9.25 to $10.25.

Increased domestic wheat use for food and seed, along with 25 million bushels increase in export projections, results in a 32 million bushels decrease in expected carryover. Wheat 2007-08 ending stocks are now projected to be only 280 million bushels, the lowest in 60 years!

Small production adjustments in a number of foreign countries were more than offset by decreases in expected use. This resulted in a slight increase in expected world carryover from 109.80 mmt to 110.06 mmt. The recent sharply higher wheat futures prices were also reflected in a thirty cents increase in projected 2007-08 wheat prices, now expected to range from $6.20 to $6.60.

The US ending stocks estimated for corn, soybean and wheat, while within the range of estimates, were all less than the average pre-report trade estimates. This suggests bullish news and early calls were for higher futures prices when trading opened, but early trading did not produce expected price gains.

Futures price action often slows during December as the holiday season approaches. However, recent price action suggests that thin trading action can result in volatile price action as trade adjusts to the tighter supply situation.

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