By James Barnett

Bridge News

CHICAGO (B)--On May 10, the U.S. Department of Agriculture will unveil its first supply/demand balance sheet for the 2001 to 2002 crop year since the Outlook Forum in February, focusing attention on new-crop prospects. Analysts look for 2001 to 2002 U.S. soybean ending stocks to total at least 400 million bushels in the report.

A record large crop in South America and record high prospective U.S. seedings have combined to create the likelihood of a sharp increase in projected U.S. carryout.

Most of the variables USDA will use to project the size of the 2001 U.S. soybean crop are already known. Specifically, March planting intentions of 76.7 million acres and the February Outlook Forum's trendline yield of 39.5 bushels per acre should lead, with a standard rate of abandonment, to a crop of 2.985 billion to 2.995 billion bushels.

While USDA could adjust the trendline yield, analysts find this prospect unlikely. So with crop estimates fairly clear, of more interest is where USDA estimates new-crop consumption.

Dale Gustafson, analyst with Salomon Smith Barney, sees USDA increasing the domestic crush from its 2000 to 2001 estimate of 1.590 billion bushels by an additional 50 million, which would put it at a record high 1.640 billion.

Dale Gustafson, analyst with Salomon Smith Barney, sees USDA increasing the domestic crush from its 2000 to 2001 estimate of 1.590 billion bushels by an additional 50 million, which would put it at a record high 1.640 billion.

Gustafson also expects USDA to increase exports by 40 million bushels over 2000 to 2001's current 990 million, while residual could decline by 10 million.

Anne Frick, oilseeds analyst with Prudential Securities in New York, noted that, as of the February Outlook Forum, USDA had underestimated both domestic use and exports for the current marketing year. She said the government should increase its usage figures by a similar amount for the upcoming year.

Frick termed an ending stocks projection of around 425 million bushels as "ample, but not excessively burdensome," especially considering USDA pegged carryout at 475 million at the Outlook meeting in February.

Others were more concerned about the potential for high stocks to be bearishly construed.

"Anything over 400 million bushels would probably be bearish," said Gustafson. "It's a big number."

There are other issues that could skew the market reaction to USDA's projections.

The first is a debate over whether U.S. exports, which are forecast to hit a record high 990 million bushels in the current marketing year, will continue to grow in the upcoming year.

Analysts point to two factors that could undermine the trend for increasing U.S. exports. The first is the massive size of the South American soybean harvest, which could narrow the window in which U.S. soybeans dominate the world export scene.

"With the size of this year's crop in South America, the U.S. may only be exporting soybeans for a couple of months next winter," predicted a cash-connected source at the Chicago Board of Trade. "The market may not truly feel the size of the South American harvest until next fall, when they still have huge stocks of soybeans sitting around."

Another issue is the tenuous relationship between the U.S. and China.

Bill Nelson, analyst with A.G. Edwards in St. Louis, warned, "A lot of people want to get exuberant about our export prospects. The problem is that China has been responsible for the much of our increase in export sales, and our relationship with them hasn't been looking that good lately."

Bill Nelson, analyst with A.G. Edwards in St. Louis, warned, "A lot of people want to get exuberant about our export prospects. The problem is that China has been responsible for the much of our increase in export sales, and our relationship with them hasn't been looking that good lately."

On the bullish side is a tendency for USDA to overestimate soybean ending stocks in its May report and to lower the forecast as the year winds on.

"USDA has underestimated new-crop soybean usage in its May report in 16 of the past 23 years, and it will probably be 17 of 24 years once this season in concluded," predicted Frick.

While most eyes have turned to new-crop export prospects, bulls could receive a little support from an expected dip in 2000 to 2001 U.S. soybean ending stocks from April's estimate of 300 million bushels.

Brian Anderson, analyst with Anderson Commodities and Consulting in Shawnee Mission, KS, sees ending stocks dropping by 10 million to 15 million bushels on the back of higher estimates for both export and crush demand.

Soybean stocks for 2000 to 2001 are now barely higher than the year-ago figure of 290 million.

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