Authentication in batch processing

I have postgres set up to require usernames and passwords for access.

The following script works just fine in 7.1.2 without manual
intervention. Using 7.2.1 psql issues a password prompt and
blocks until a password is manually entered.

#######################################
#!/bin/sh

psql mydb <<\__EOD__
mypassword
create table mytable
(
ssn char(9),
name char(50)
);
__EOD__
#######################################

For several years now I have been using scripts like the above
to drop and create 14 databases, and create and populate ~100
tables on a nightly basis. I need this or something like it
to work.

As always I assume I am doing dumb.

Can someone help?

hal