Oilseeds prices have started the year with declines, made much worse with the release of U.S. Department of Agriculture (USDA) figures which projected record 2009-10 production, giving a bearish tone to markets worldwide.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report, released on Jan. 12, confirmed the bearish outlook. It raised projected world oilseeds production for 2009-10 to 431.6 million tonnes, up 3 million from last month. It compares with the 2008-09 estimate of 395.17 million tonnes.

Since the start of 2010, the price of front month March 2010 at the Chicago Board of Trade has fallen from over $10.70 a bushel ($370 a tonne) to around $9.40 (mid-$340s a tonne).

According to the USDA Economic Research Service’s Oil Crops Outlook report published on Jan. 13, the price paid to U.S. farmers for soybeans was $365.97 a tonne in December, having recovered from a dip to $346.86 in October.

However, although much of the increase since last year is due to increased U.S. soybean production, the increased estimate also relies on bigger crops in South America which have yet to be harvested. That means that an element of uncertainty does remain.

"Increased soybean, peanut and cottonseed production are only partly offset by reduced sunflowerseed and rapeseed production," the WASDE report said. It projected world soybean production at a record 253.38 million tonnes, 3.1 million more than was projected a month earlier and well above the previous year’s 250.25 million. U.S. soybean production is projected at 91.47 million tonnes, up from the previous projection of 90.34 million tonnes and 2008-09’s 80.75 million.

Brazil’s soybean crop is also projected at a record level. The USDA’s report now puts it at 65 million tonnes, an extra 2 million compared with the previous projection and well above 2008-09’s 57 million. "The increase is mainly due to higher area reflecting favorable planting conditions and recent survey data from the Brazilian government," the report said of the revised estimate.

The USDA also raised its estimate for world oilseed trade to 95.38 million tonnes, up from 94.43 million in its previous estimate and the 2008-09 estimate of 94.21 million tonnes. The main reason for the increased projection is higher estimates for China.

By Jan. 14, accumulated U.S. export sales of soybeans were 22.86 million tonnes for the marketing year (Sept.-Aug.) to date, compared to 16.05 million tonnes the year before, with the biggest share in the increase coming from imports by China, which took 14.75 million tonnes, compared with 9.57 million the year before.

The same USDA sales figures show a sharp rise in U.S. sales of soybean meal to the E.U. countries, up to 324,300 tonnes so far this year, compared with 54,900 tonnes for the same period a year ago. The freeing of shipments to the E.U., effectively blocked by European rules on GM products until late in 2009, makes much higher overall feed ingredient trade likely.

This year is likely to see a sharp rebuilding of oilseeds stocks. In total, the bumper crop will allow ending stocks to rise to 71.13 million tonnes of oilseeds, according to the January WASDE report, up from the USDA’s month-earlier estimate of 68.7 million tonnes, but a sharp recovery on 2008-09 closing stocks of 55.61 million.

World soybean ending stocks are set to recover to 59.8 million tonnes, up from the previous estimate of 57.09 million and well above the 2008-09 ending stocks figure of 42.87 million tonnes.

According to Malaysian Palm Oil Board figures cited in a report by the United Kingdom’s HGCA, palm oil stocks in Malaysia hit a 13-month high in December, rising nearly 16% to 2.24 million tonnes from November as demand from overseas fell faster than production. The HGCA also highlighted the launch of the world’s third-largest free trade area between China and the Association of Southeast Asian Nations. Under the free trade agreement, tariffs on goods, including palm oil and palm-based products, will have to reduce to zero.

Chris Lyddon is World Grain’s European editor. He may be contacted at