USDA expects U.S. 2007-08 soy planted area to be 28.5 million hectares and production is seen at 78.4 million tonnes, according to the latest forecast announced last week at the annual Agricultural Outlook Forum. USDA said the output figure is a 10% decrease from last year’s record crop as farmers are likely to plant more corn versus soybeans.

USDA said soy yields this year are seen at 2.79 tonnes per hectare based on regional trend yields for 1989 to 2006. “Acreage contraction especially in the higher-yielding corn belt, is likely to put some downward pressure on yield gains,” USDA said.

On the demand side, USAD said soybean crush would be around 49.5 million tonnes. “Despite higher soybean prices, strong product prices and relatively large soybean supplies are expected to support a modest increase in domestic crushing,” USDA said. U.S. soybean meal consumption is projected to increase one percent to 2 percent, limited by increased availability of corn by-products and by small expected gains in poultry and hog production because of relatively high feed costs, USDA said. Higher corn prices are expected to continue supporting meal prices. Meanwhile, USDA also said soyoil prices also are seen rising as growing worldwide demand for biodiesel is expected to support all vegetable oils firm.

USDA expects soybean exports to be 30.6 million tonnes, which is a 2 percent rise from 2006-07. Although export business is seen up, the U.S. share of trade is seen declining as “rising soybean prices are providing foreign producers with attractive production incentives,” USDA said. U.S. ending stocks for 2007-08 are seen at 10.1 million tonnes.

China is expected to continue dominating the growth of global soybean imports because of its growing demand for soymeal and soyoil combined with excess crush capacity built over the last few years, USDA said.

In related news, China said last week its 2007 soybean imports are expected to exceed 30 million tonnes, up from 28.27 million tonnes last year. This will mainly be due to continued growth in the country’s soybean crushing capacity, said ChinaNationalGrain & OilsInformationCenter. China imported 1.54 million tonnes of soyoil in 2006, down 8.9 percent from a year earlier, while it exported 117,709 tonnes of soyoil, up 86.7 percent over the previous year.

USDA last week presented a very positive forecast for the U.S. farm sector in 2007-08. Exports were projected at a record $78 billion for fiscal year 2007. That’s up $9.3 billion from last year, the second-largest increase on record and the fourth record year in a row, said Agriculture Secretary Mike Johanns. “Two thirds of the increase is due to the grain and oilseeds sectors,” he said.

According to Johanns, several trends are driving the rise in export value and keeping U.S. competitiveness strong, such as demand for corn due to increased ethanol production, reduced competition for wheat, and only moderate growth in South American oilseed production.

Chief economist Keith Collins next outlined the rosy outlook for farm income in 2007 “and beyond.” “Both crop and livestock receipts are forecast to be record high, with their combined total up $16 billion over last year,” he says. Net cash farm income is forecast to be $67 billion in 2007, only slightly above last year, however, reflecting lower government payments and higher production costs. Cash farm production expenses will total a record $223 billion, the sixth consecutive year of increase. Fertilizer and fuel account for a quarter of the average $11 billion increase per year over the past four years, and labor, feed costs and interest expenses are other major contributors.

The Bureau of National Affairs (BNA) reports that the next farm bill is expected to be introduced in Congress no earlier than late April as lawmakers await word from the budget committees on the spending baseline. Meanwhile, House and Senate Agriculture committee members are hoping to increase, or at least maintain, current authorized funding levels for commodities programs.

A House aide told BNA that “until we’re clear on budgetary resources, we can’t write a farm bill.” She said House Agriculture Committee Chairman Collin Peterson (D-Minn.) would like to introduce a bill in late April or early May and go to the floor by July for an eventual conference in September. The current farm bill expires September 29. Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) intends to pursue a similar time frame.

Back in the summer of 2005 and into early 2006, soybean oil prices were supported by high energy prices that made it economically feasible to burn soyoil in place of heating oil. This provided a floor for soybean oil that prevailed for many months. Since then, soyoil prices have appreciated and heating oil prices have declined such that straight burning of soyoil in industrial boiler applications is no longer an issue. Soyoil prices have risen to levels that have largely taken the profitability out of turning soyoil into biodiesel. That appears to have kept a lid on soyoil prices since the start of 2007. While soybean futures have been chasing corn higher, poor biodiesel profitability has kept a lid on soybean oil prices and reduced the oil share from more than 43 percent in December to less than 40 percent this month.

In related news, last week the Census Bureau estimated January soyoil stocks at a surprisingly large 1.48 million tonnes, exceeding trade expectations by about 45,400 tonnes. Soyoil production and implied usage for January were not out of line with expectations. Rather, it was a 34,500 tonne upward revision in December stocks that boosted January stocks further into record territory than was anticipated.

The soy complex was down significantly on March 1 reflecting heavy speculative selling and the outlook for higher supply ahead. Strength in corn is the primary reason for the soybean market rally of the recent past and a shift in focus to the old crop soybean supply/demand numbers, the South American harvest, the overbought technical condition and large deliveries are factors that could drive the market lower. March bean futures closed down $9.92 finishing at $274.20; May was $9.37 lower, closing at $279.88; and July lost $9.65 ending at $285.22. March meal was down $5.07 closing at $242.29; May was $5.62 lower, finishing at $248.68; and July decreased $9.65 to finish at $254.08. March oil closed $15.87 lower to finish at $651.02; May was down $16.53, closing at $661.60; and July lost $14.77, ending at $671.96.

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