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"In addition, stocks
in the United States are not expected to build to burdensome levels,
providing opportunity for higher prices in the last half of the
marketing year," said Darrel Good.
Good's comments came
as he reviewed prospects for U.S. crops during this season. With a
large U.S. wheat crop and prospects for record or near-record large
corn and soybean crops, market attention will soon focus on demand
for the 2003 crops. The USDA's July update of world supply and
demand estimates suggests that the large crops will be met with
larger consumption, although at lower average prices than for the
2002-03 marketing years.
In the case of wheat,
the USDA now estimates the 2003 crop at 2.311 billion bushels, 135
million larger than the June estimate and 695 million larger than
the 2002 crop.
"Most of the
year-over-year increase in production is coming in winter wheat,
reflecting a large increase in harvested acreage and an 8.5-bushel
increase in the U.S. average yield," said Good. "The final crop
estimate may well be larger than the current estimate."
Feed and residual use
of wheat during the 2003-04 marketing year is expected to rebound to
a normal level of 175 million bushels. The larger-than-expected June
1 inventory of wheat results in a very small estimate (102 million
bushels) of feed and residual use during the 2002-03 marketing year.
U.S. wheat exports declined to the lowest level in 30 years in
2002-03 but are expected to increase by 115 million bushels in
2003-04. The projected increase reflects a much smaller crop and the
expectation of a sharp reduction in exports from Russia.
U.S. stocks of wheat
are expected to increase from 492 million bushels on June 1, 2003,
to 738 million by June 1, 2004. Stocks outside the United States are
expected to drop sharply for the second consecutive year.
"Most of that decline
is occurring in China," said Good. "For the year, the USDA projects
the average farm price of wheat in a range of $2.80 to $3.40. An
average at the midpoint of $3.10 would result in a
24-cent-per-bushel countercyclical payment for the 2003 crop."
For corn, the USDA
has not yet made the first objective yield and production estimates
for the 2003 crop. Based on the June 30 acreage report and crop
conditions in early July, the World Outlook Board projects the
average yield at a record 142.7 bushels per acre, 4.1 bushels above
the current record yield of 1994.
Production is
forecast at 10.27 billion bushels, 11.4 percent larger than the 2002
crop and 2.1 percent larger than the June projection. Production of
other feed grains (sorghum, oats and barley) is expected to be
nearly 28 percent larger than in 2002.
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"At modest price
levels, consumption of U.S. corn during the 2003-04 marketing year
is expected to be 340 million bushels more than during the current
year," said Good.
"Exports are expected
to jump by 250 million bushels as Chinese shipments decline. Food,
seed and industrial use is expected to increase by 190 million
bushels as ethanol production expands.
"Feed and residual
use, however, is expected to decline by 100 million bushels due to
fewer hogs, increased feeding of sorghum and increased use of feed
byproducts from ethanol production."
Sept. 1, 2004, corn
stocks are projected at 1.339 billion bushels, 330 million more than
projected for Sept. 1, 2003. The marketing-year average price is
projected in a range of $1.90 to $2.30, compared with $2.30
projected for the current year.
"An average at the
midpoint of $2.10 would result in a countercyclical payment of 22
cents for the 2003 crop," said Good. "If the large crop does
materialize, cash prices for the new crop may remain below the loan
rate into harvest, resulting in some loan deficiency payments."
For soybeans, the
World Outlook Board projects an average 2003 yield of 39.7 bushels,
the same as projected last month, and a crop of 2.885 billion
bushels, 30 million larger than the June projection. The increase
reflects the larger acreage reported on June 30. The USDA projects a
40-million-bushel drop in U.S. soybean exports during the 2003-04
marketing year as South America continues to increase market share.
The 2004 South American crop (not yet planted) is projected at 3.57
billion bushels, nearly 6 percent larger than the record 2003 crop.
Area is expected to increase by 9 percent in Brazil and 5 percent in
Argentina.
The domestic soybean
crush is projected to increase by a modest 15 million bushels during
the year ahead, reflecting weak export demand for oil and meal. With
feed, seed and residual use at a normal level, close to 170 million
bushels, total consumption of U.S. soybeans during the year ahead is
projected at 2.784 billion bushels, resulting in a projected
105-million-bushel increase in inventory.
"The 2003-04 marketing year average price
is projected in a range of $4.35 to $5.35, compared to $5.50 for the
current year," said Good. "An average at the midpoint of $4.85 would
result in a 36-cent countercyclical payment for the 2003 crop."
[University
of Illinois news release]
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