By Joanna Newman
THE US soyabean fiasco is just as bad as everyone feared, as record end-of-year stocks are predicted.
The countrys ending stocks will more than double this year from 200 million bushels to 430 million bushels.
Surpluses will then soar further to a record 595 million bushels at the end of the 1999/2000 season, according to the latest US Department of Agriculture (USDA) Supply and Demand report.
Even these disastrous forecasts may be too optimistic. The USDA is assuming record high exports in 2000 of 930 million bushels, up from 770 million this year, plus record high soya bean crushing (1.64 billion bushels versus 1.56 billion this year).
If the USA fails to achieve these rosy demand predictions, then the domestic overhang of unwanted inventory could be worse.
This is the result of the Freedom to Farm Act, which was intended to encourage farmers to make planting decisions based on market conditions.
But many producers simultaneously responded to high soya values by stepping up production in the late 1990s.
The resulting glut caused a price collapse over recent months, which in turn triggered federal subsidy programmes.
These subsidies have had the paradoxical effect of encouraging farmers to plant more soyabeans.
Wet planting conditions for maize may encourage farmers to switch even more acreage to soyabeans this month.
The situation has been exacerbated by a bumper South American harvest and export competition from the devalued Brazilian currency.
Not surprisingly, the Chicago July soya beans contract has dropped, closing on Tuesday (18 May) at 475.5/bushel, compared with 500 a month ago and over 600 in December.