USDA's January reports confirmed a record large 2004 US soybean crop, prospects for large domestic stocks, and a record crop of soybeans in South America in 2005.

"While these projections were all well anticipated, prices moved lower following the reports," agricultural economist Darrel Good noted in his January market commentary.

"In general, soybean prices have remained higher than anticipated since October in the face of large surpluses. Price strength may have come as a result of a slow pace of farmer sales, a need to rebuild pipeline supplies and a sharp increase in domestic and export consumption following the extreme slow down in July and August 2004," he said.

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But that could be coming to an end.

"With indications of a moderation in the domestic crush pace and anticipation of China turning to South American supplies, those price supporting factors may be dissipating," he says. "Cash prices may come under additional pressure over the next two months, challenging the October 2004 lows.

"Uncertainty about both the magnitude of acreage in the US in 2005 and the potential impact of soybean rust on 2005 yields, along with the importance of spring and summer weather, points to more volatile prices from April forward," he said.