Rains in the central U.S. helped dampen soybean prices from their highest levels in three years this last week, as profit-taking hit the soybean complex ahead of the USDA's annual acreage report and third quarter stocks report on June 29.

   After modest yearly gains the first six months of the crop year, the U.S. soybean crush has remained seasonally strong during this year's third quarter because of expanding world bio-diesel demand and El Niño-moderated palm oil output in Southeast Asia this year. Strong world vegetable oil prices have strengthened soybean oil to its highest value since 1984 and encouraged U.S. processors to keep their crush seasonally strong this spring, up 19 million bu. to 451 million bu. vs. 2006. High energy prices also have boosted this year's third quarter U.S. bean exports vs. last year by about 33 million bu. to 218 million (according to an average of USDA shipping data) as Asian buyers utilized lower world freight costs from the U.S. to reduce purchase costs-despite record South American crops this year. Despite these encouraging demand trends, which could boost this year's export and crush projections by 15 million bu. each on next month's U.S. supply/demand report, this year's June 1 soybean stocks will remain a record 1.095 billion bu. because of this year's record soybean supplies.

   Strong soybean prices and this spring's weather have likely encouraged producers to plant 1.1 million additional soybean acres since earlier intentions, bringing 2007 seedings to 68.25 million acres. These acres have likely come from replanting of freeze-damaged wheat fields in the Delta, the eastern Midwest, and the eastern Plains areas-along with the higher level of double-cropping in these areas because of the current high price. Wetness until early June in the Missouri River area of the western Midwest also probably prompted some late season switching from corn because of growing season considerations. The USDA doesn't update its supply/demand projections until July 12, but this level of larger plantings may have a limited impact if higher old-crop demand lowers 2007/08 beginning stocks by 30-40 million this summer.

   Weather remains the main market factor for the balance of the growing season, but new-crop's declining carryover and the need to encourage a strong South American soybean expansion will limit selling pressure until this year's yield potential is determined. Hold sales for now, with November nearby support at $8. We will be considering swings to recent highs as an opportunity to finalize old-crop and increase new-crop sales.