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"High temperatures in
western growing areas, in particular, raised concerns about corn,
sorghum and soybean crops," said Darrel Good. "In parts of the
eastern Corn Belt, excess precipitation was more of a concern. The
2003 corn and soybean crops are still expected to be large, but
speculation of a corn crop over 10.5 billion bushels and a soybean
crop near three billion bushels has faded."
Good's comments came
as he reviewed the markets, where December 2003 corn futures and
November 2003 soybean futures declined sharply from mid-June to
mid-July on the basis of good crop ratings and expectations of large
crops. December corn futures dropped more than 32½ cents and
established a new contract low just under $2.10. November soybean
futures declined about 70 cents and traded to the lowest level since
March before the halt in price declines for both soybeans and corn.
"Some forecasters are
calling for high temperatures to move into the Corn Belt during
early August," said Good. "The National Weather Service pre-cast for
the first week of August shows prospects for below-normal
precipitation in most of the Midwest and Plains states. The USDA
will release the first objective yield and production estimates for
corn and soybeans on Aug. 12."
The rapid pace of
2003 crop soybean export sales also contributed to the halt in the
price decline. Through July 17, the USDA reported that 171 million
bushels of U.S. soybeans had been sold for export during the 2003-04
marketing year. That represents 17.3 percent of the USDA's forecast
of next year's exports.
"About 28 percent of
new-crop sales have been to China and nearly 48 percent to unknown
destinations, assumed to be China and/or the European Union," said
Good. "The reasons for the large, early purchases by China are not
clear, but purchases are likely in reaction to lower prices and
uncertainty about GMO policy after September.
"The market is trying
to determine if the large purchases to date are an indication of
larger-than-expected Chinese demand or mostly a change in pattern of
purchases."
New-crop corn export
sales have been fairly routine, he added. Cumulative sales as of
July 17 totaled 61 million bushels, or 3.3 percent of the USDA
forecast of 2003-04 marketing year exports. Japan accounts for about
60 percent of those purchases.
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"The pattern of wheat
prices has differed from that of corn and soybeans," Good noted.
"September futures at Chicago declined about 40 cents from early
June to early July on the basis of expectations of a large U.S.
crop. However, prices moved sharply higher in July, with September
futures exceeding the spring high.
"The sharp recovery
in wheat prices reflected concerns about the U.S. spring wheat crop,
as high temperatures moved into the upper Plains states, and
anticipation of a robust export demand for U.S. wheat. Expectations
of growing export demand for U.S. wheat stem from expectations of
smaller crops in Europe, Russia and the Ukraine and deteriorating
crop conditions in China."
Through July 17, the
USDA reported U.S. export commitment (shipments plus outstanding
sales) at 259 million bushels, 14.5 percent above the commitments of
a year ago. That increase is in line with the 13 percent increase in
exports projected by the USDA. Through July 17, however, commercial
exports are trailing last year's pace by 2 to 6 percent, depending
on the source of export estimates.
The USDA will update
U.S. and world wheat production estimates on Aug. 12. The estimate
for the U.S. spring wheat crop is generally expected to be below the
July estimate. However, that decline may be partially offset by
another increase in the estimated size of the U.S. winter wheat
crop. The Canadian crop estimate will also be watched with interest.
"Corn and soybean
prices for harvest delivery remain below the loan rate in many
areas," said Good. "Some producers have been inclined to price some
of the new crop at prices below the loan rate, anticipating that
prices would decline further into harvest. Weather and crop
uncertainty suggest that there is significant risk with that
strategy."
For wheat, the recent
price increase has not resulted in a decline in spreads in the
Chicago futures market but has been accompanied by a weakening basis
in some areas.
"In the west-southwest district of
Illinois, for example, the spot cash price of wheat increased by 25
cents from July 3 to July 25, while September futures at Chicago
increased by 32 cents," said Good. "On July 25, the bids for January
2004 delivery in west-southwest Illinois averaged 29 cents over the
spot bid of generally increasing storage costs. The rapid
post-harvest recovery in prices and the large carry in the market
offer some opportunities for January sales."
[University of Illinois news release]
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