USDA’s estimate of the 2007 U.S. soybean crop was in line with trade expectations, dropping 245,000 tonnes from November to 70.4 million tonnes, according to data from USDA’s Crop Production Annual Summary. USDA’s December 1 soybean stocks estimate of 63.4 million tonnes was 1.63 to 1.77 million tonnes more than trade expectations. USDA’s production and stocks estimates imply September/November residual use of just 1.03 million tonnes, which would be the lowest since 1986-87. Despite the small residual use for the September/November quarter, USDA nudged its 2007-08 residual use higher by 54,400 tonnes to 2.15 million tonnes so that its 2007-08 carryout could round off to 4.76 million tonnes, down 272,000 tonnes from last month.  USDA hiked its price projections further for soybeans and the products and boosted soybean oil production and ending stocks by 40,800 tonnes on a higher oil yield.

USDA cut Brazil’s soybean crop by 1.5 million tonnes to 60.5 million on lower area. The accompanying cut in Brazil’s soybean exports has been offset by larger exports for Argentina and Paraguay, dropping world soybean stocks 1.1 million tonnes in the process. USDA’s reports for soybeans did not present a bullish surprise, but bullish production and stocks figures for corn and smaller-than-expected winter wheat area likely will keep soybean futures moving higher.

Seed companies are struggling to make sure there are ample soybean seed supplies because many U.S. farmers are planning to plant soybeans in 2008, a senior official of a Monsanto unit told Reuters. Kevin Eblen, the head of the Delta & Pineland business unit bought by Monsanto last year, told Reuters in an interview that soybean acres “across the U.S. are going to increase” this year as farmers try to take advantage of steep price rallies in the commodity. “That is actually putting a lot of pressure on the industry’s capability to supply soybean seed,” Eblen said. “Most companies in the business are scrambling for supply.”

Eblen added that, “[Cotton] acres are going to be off certainly. With commodity prices where they are...farmers are probably more motivated to switch out over to these other commodities.” Eblen said the reduction in cotton acreage also stemmed from the rise of the biofuel industry in the country, especially in the manufacture of the alternate fuel ethanol from corn.

The cost to move grains and soybeans out of the United States has eased anywhere from 13% to 41% since hitting record highs during November. From the Gulf to Japan for example, the rate has dropped 13% since hitting a record $115 per metric ton in late October, ending this week at just under $100. The Gulf to Europe was down by a similar amount to $66 per metric ton from the mid-November high of nearly $78. The Pacific Northwest (PNW) to Japan rate dropped the fastest down 41% to less than $50 per metric ton for the week of January 4 since hitting a record of nearly $84 in late October. Rates were last at these levels out of the Gulf in late September and late August from the PNW. These rates are derived from the changes taking place in the time-charter markets as shown in the figure on the next page for two key Panamax routes.

The drop in rates was led by a build up in capacity among the various vessel class sizes, especially for Capesize vessels. Iron ore loadings out of Brazil were curtailed by congestion, sending some vessels back to the spot market while China has slowed its iron ore imports somewhat, perhaps as a maneuver ahead of the annual iron ore rate negotiations.

Meanwhile, though barge freight rates ended about 8% lower during 2007, they followed a record year and ended the second highest on record. If it was not for the late summer surge in barge demand and improved grain export prospects, rates would have finished much lower. For 2008 the rate outlook is expected to be down 5%.

India will import roughly  1.2 million tonnes of edible oils in the first quarter of the year, up from around 780,000 tonnes in the same period last year, despite the increase in global prices. Govindhbhai Patel, an official from India’s Central Organization of Oil Industry and Trade (COOIT), said lower carryover stocks of oilseeds and increased domestic consumption would account for the rise in purchases. “Last year we had high carryover stocks of 1.4 million tonnes of rapeseed but this year we only have around 0.5 million tonnes,” Patel said. “International prices of oils have gone up very high in the last few weeks and domestic prices are also high compared to last year because of good consumption levels.”

Patel also said he expected soyoil imports to increase by roughly 185,000 tonnes in spite of the difference in price between soyoil and palm oil currently standing at around $200 a tonne, from $20 a tonne last year.

In related news, India may cut customs duties on vegetable oils to rein in a spike in domestic prices and to keep a lid on inflation pressures. “The sharp rise in prices of oils in the last fortnight is a cause of concern to the government,” said B.V. Mehta, executive director of the Solvent Extractors’ Association of India. “This might compel the government to reduce the duty on vegetable oils in the near future to safeguard consumer interests.”

China’s imports of edible oils jumped 26.6% in the first ten months of 2007, compared to the same period in the previous year, and the total value of the shipments jumped a staggering 98.6% according to the latest customs data. Around 6.97 million tonnes of vegetable oils worth $4.99 billion were imported by China between January and October last year. Sources at the Chinese customs office said the increase in purchases was partly due to a government incentive to scrap the import quota system for edible oils at the beginning of 2006. The increase in costs was due to the rising global value of edible oils with the average price of soyoil at $727.60 a tonne, up 44.9%.

The soy complex closed  mixed on January 10 amid positioning ahead of the January 11 USDA reports. January bean futures closed down $1.84, finishing at $463.06; March lost $0.83, closing at $463.06; and May was down $0.92, ending at $469.40. January meal decreased $1.10 closing at $376.44; March was $0.22 lower, finishing at $383.82; and May meal closed down $0.33 ending at $389.99. January oil increased $3.31 to finish at $1121.04; March was up $4.19, closing at $1130.30; and May was $8.38 higher, closing at $1144.41.

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