USDA last week lowered its 2007-08 soybean carryout to 5.03 million tonnes, which is down 680,000 tonnes from its November estimate, on a 544,000 tonne boost to exports and a 136,000 tonnes increase in the crush. Trade expectations for USDA’s ending stocks projection had ranged from 3.92 million tonnes to 5.72 million tonnes, with an average of 5.36 million tonnes. The increased soybean meal production resulting from the larger crush was added to exports. USDA’s projected usage of soyoil in biodiesel was cut by 181,000 tonnes to 1.72 million tonnes, while 90,700 tonnes was added to other domestic usage of soybean oil. U.S. soyoil exports were increased from 703,000 tonnes to 748,000 tonnes.

Global oilseed production for 2007-08 is projected at a record 391.3 million tonnes, USDA said. USDA’s soybean production forecasts for Brazil and Argentina were unchanged from last month at 62 million tonnes and 47 million tonnes, respectively. Projected soybean production for India increased 1 million tonnes from last month to a record 9.2 million tonnes, USDA said.

Global oilseed crush for 2007-08 is up 1.4 million tonnes due mainly to higher soybean crush for India, China, Paraguay, and the United States.Major changes by USDA in its global oilseed trade forecast include a 0.5-million tonne increase in China soybean imports and a 0.5-million tonne decrease in EU-27 soybean imports.Paraguay soybean exports also declined reflecting a higher projected crush, according to USDA.

Global oilseed ending stocks for 2007-08 are reduced 1.8 million tonnes to 54.5 million tonnes, reflecting lower soybean stocks for Argentina and the United States.Argentina stocks were reduced by USDA because of a projected increase in soybean exports for both 2006-07 and 2007-08.Global oilseed stocks for 2007-08 are projected by USDA to be down 22 percent from 2006-07.

Brazil’s Ministry of Agriculture’s supply department (CONAB) issued an update for the 2007-08 crop plantings. Soybean area was estimated at 21 million hectares, which was 240,000 hectares below its previous estimate and 1.3 percent above last season. CONAB’s December area estimate has averaged a 3 percent error predicting the final.

In related news, oilseeds analysts “Oil World” said it has cut its estimate of Brazil’s old crop soybean harvest gathered in early 2007 and also its forecast for the country’s new crop in 2008. It has cut its estimate of Brazil’s soybean harvest in February/April 2007 by 800,000 tonnes to 58.5 million tonnes. “We have reduced our Brazilian soybean crop estimate to 61.0 million tonnes for early 2008, down by 700,000 tonnes from our previous estimate but up by 2.5 million tonnes from the last year,” it said. The reason for the new crop cut was largely concern about dry weather in parts of Brazil and fears the Asian Rust crop disease will become more severe in coming weeks.

Oil World also cut its old crop estimate following indications that Brazilian crushers cannot find enough soybeans to cover their needs. “Brazilian exports of soybeans as well as of soyoil and meal will turn out smaller than expected in November and December 2007,” it said. “Crushings have declined sharply in recent weeks due to insufficient old crop supplies.”

The NOPA crush for November was reported at 146.7 million bushels, below the low end of trade expectations. The implied Census crush for November looks to be equal to last year’s crush of 155 million bushels. During the first three months of 2007/08, the crush has been 7 million bushels above last year. While the soybean crush was disappointing, NOPA’s soybean oil stocks largely were in line with trade expectations as they increased slightly from the previous month.

The soyoil yield increased contra-seasonally in November. It appears that higher oil content of new-crop soybeans are making up a larger share of the crush as record old-crop soybean supplies are used up. Implied soybean meal domestic disappearance for November was rather small, but October domestic use was quite large as there may have been a large amount of soybean meal in the transportation pipeline ahead of November big export program.

After the Senate last week passed its version of the farm bill, the real battle now begins: the House-Senate conference. That is where the Bush administration and USDA officials will have far more leverage than occurred curing floor debates.The main topic in conference will be the financing package of the farm bill: if the White House determines that it contains any tax increases, President Bush’s advisors will recommend that he veto the measure. House Agriculture Committee Chairman Collin Peterson (D-Minn.) says he has a conference strategy to deal with the financing issue, but has provided no details.

Acting Agriculture Secretary Chuck Conner last week made it clear that the Bush administration is serious regarding its farm bill veto threats. Conner said both the House and Senate farm bills were “on the wrong track” and need substantial changes before President Bush will sign the measure. Observers say that there are some Democrats and Republicans who both think a presidential veto would work to their party’s advantage. The Democrats think a farm bill veto would help them pick up some additional rural votes and some farm-state victories in 2008 elections. Some Republicans believe that if the conference report retains tax increases to help pay for the additional farm bill spending, President Bush and other Republicans can note that is no way to offset additional spending elsewhere.

The Bush administration says the House and Senate farm bills are packed with taxes and budget gimmicks and lack sufficient reform. The key political question is whether Bush really is willing to cast an election year veto of a bill popular in Republican states, and whether Democrats can peel away enough GOP members to overcome the president’s resistance. If the final farm bill contains tax increases, most observers believe President Bush would not hesitate to use his veto. And, vetoing bills that increase taxes plays to the Republican base voter – something even some farm-state Republicans may have forgotten.

The soy complex closed mostly lower December 13, reflecting a strong dollar and lower energy prices. January bean futures closed down $2.02, finishing at $421.08; March lost $1.75, closing at $428.43; and May was down $1.38, ending at $433.39. December meal increased $1.87 closing at $354.06; January was $0.99 lower, finishing at $354.50; and March meal closed down $0.55 ending at $361.22. December oil decreased $5.51 to finish at $1014.12; January was down $9.48, closing at $1019.85; and March was $10.14 lower, closing at $1033.30.

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