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Soybeans Take Another Hit in Usda Report

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Written Friday, February 09, 2001  

A Thursday U.S. Department of Agriculture report increased the soybean carryout by 25 million bushels, fooling the grain trade that expected higher exports from Europe's concerns over mad cow disease.

"It looks like the report hammered the soybean market again," says Allan Lines, Ohio State University agricultural economist. "From the point of view of the report, it did just the opposite of what the market thought soybeans would do."

USDA expects a 345-million-bushel carryout, an increase from the 320 million bushels projected in its January report. Both numbers were higher than the prereport guesses of a 295-million-bushel carryout.

The report upended trade expectations for increased soymeal exports in response to Europe's bans on using meat and bone meal in animal feeds as a precaution against mad cow disease. Europe's beef demand plummeted anyway, reducing the need for soymeal as an alternative feed.

"Across western Europe, meat consumption has dropped by 30 percent. And with that, there is less demand for our bean meal," Lines says. "When you start slaughtering all those potentially diseased cattle, as they have been doing recently, there aren't a heck of a lot of cows left to feed."

Also on the international scene, soyoil exports took a hit as Southeast Asian palm oil producers geared up production. In South America, a record soybean crop is expected.

The corn carryout news wasn't good, but it wasn't a disaster as it was for beans, Lines says. USDA projects a 1.891-billion-bushel carryout, higher than the trade's estimated 1.85 billion bushels. However, both numbers "went in the same direction" since USDA's January projection for a 1.806-billion-bushel carryout, he says. "The trade was expecting that kind of thing."

Lines attributes the increased corn carryout to competition from Argentina and China, which either boosted production or carried enough stock to fill world orders.

Domestically, ethanol production is increasing as "new plants are coming on stream" to meet demand for an alternative to the MTBE gasoline additive, Lines says.

The USDA report doesn't contain any news that might cause farmers to change their spring planting plans, Lines says. USDA will release its 2001 prospective plantings report on March 30.

Lines advises: "Be in a protective environment on beans. Think about forward contracting soybeans for late winter or March and then take advantage of a generous loan deficiency payment at harvest."

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