MANHATTAN, Kan. – At first blush, the record soybean crop recently predicted by the U.S. Department of Agriculture may appear to add so much to already-large stocks that the result would be burdensome supplies. But global demand may be strong enough to warrant that kind of production, a Kansas State University economist said.

U.S. soybean growers intend to plant a record 76.7 million acres to soybeans this year, the USDA reported on March 30. That would be up 3 percent from last year.

Add that kind of production to near-record soybean stocks – 1,405 million bushels reported in March – and supplies could look burdensome to some. However, when measured as a percent of usage, the stocks do not appear excessive, said Bill Tierney, crops marketing specialist with K-State Research and Extension.

"March 1 marked the midpoint of the soybean marketing year and it is useful to compare March 1 stocks with the total disappearance in the first half of the year," Tierney said. "On average, March 1 stocks are 105 percent of first-half usage. This year, stocks are expected to be only 85 percent of usage, a bit less than last year’s 87 percent but much more than the record low stocks-to-use ratio of 70 percent set in 1997."

Some market analysts point to the record South American soy crop and argue that just looking at U.S. stocks is irrelevant, he said.

"The argument is that the combined supplies of both the U.S. and South America are too large in relation to expected demand. Indeed, this year the combined supply of western hemisphere soybeans is

projected to be a record 99.5 million metric tons [MMT] – 6 percent more than last year’s record 94.1 MMT," Tierney said.

When western hemisphere supplies are measured as a percentage of world soy imports, however, a less burdensome supply situation becomes evident.

"This year, western hemisphere supplies are 101 percent of world soy imports," the economist said. "What that suggests is that the nearby supply of soybeans is large but not excessive, considering the record level of world import demand."

And export interest continues to appear strong.

U.S. soy customers had committed to buy 887 million bushels as of early April. That was well above 798 million a year earlier and a record amount for that date.

Tierney said that 91 percent of projected annual soybean exports were booked as of mid-March, compared with 80 percent typically booked by that date.

"So based on a seasonal of export commitments to total annual exports, on average, soybean export commitments should be only 780 million bushels as of this date."

In fact, on Tuesday, April 10, in its monthly supply-demand report, the USDA raised its projection of U.S. soybean exports to a record 990 million bushels, up 15 million from last month’s projection.

Despite the strong global demand for beans, however, the hefty supply may keep a lid on prices.

"Given the expectation that the U.S. soybean crop will be a record in 2001, it will take a significant weather threat before any large upward price move can occur," Tierney added.

November soybeans on the Chicago Board of Trade sank to its life-of-contract low at $4.32 per bushel on March 30, he noted. With futures in the low $4 range, new cash crop prices are already below the $4.25 price projected by the USDA at its Agricultural Outlook Forum.

"Barring a ‘weather market’ this summer, November soybean futures will probably set new contract lows," Tierney said. "However, those producers who want to hedge their anticipated 2001 loan deficiency payment have good odds that the market will stage at least one rally this spring or summer. Those producers may want to purchase an in-or-at-the-money September call option soon in anticipation of this rally."

As of April 2, when September futures were trading at $4.29, a $4.40 call option cost 23 cents, he noted.