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"Corn prices will likely remain under
pressure through harvest," Darrel Good added.
Good's comments came as he reviewed
recent developments in the corn and soybean markets. The USDA now
forecasts the 2003 U.S. corn crop at 10.2 billion bushels. That
forecast is 263 million larger than the September forecast and 156
million larger than the previous record crop of 1994.
The U.S. average yield is forecast at
142.2 bushels per acre, 3.6 bushels above the 1994 record. Of the
major corn-producing states, the average yield is expected to be
below that of a year ago only in Iowa, Minnesota, North Dakota and
Wisconsin. Large increases in average yields are expected in eastern
and southeastern states.
In contrast, the USDA now forecasts the
2003 U.S. soybean crop at 2.468 billion bushels, 175 million bushels
less than forecast in September and 280 million less than produced
in 2002. At 34 bushels per acre, the projected U.S. average yield is
four bushels below the 2002 average, the lowest in 10 years and 7.4
bushels below the record yield of 1994.
"The forecast represents the smallest
crop in seven years," said Good. "Average yields in 2003 are
expected to be lower than in 2002 in only 112 of the 29 states
included in the USDA's forecast. Sizable increases are expected in
some eastern and southern states. Large declines are expected in the
three largest soybean-producing states -- Illinois down six, Iowa
down 14, and Minnesota down 11.5."
In the case of corn, the large crop is
expected to be met by an increase in both domestic use and exports.
"Increased ethanol production and a
modest increase in feed consumption are expected to push domestic
use up by 217 million bushels, or 2.7 percent," said Good. "U.S.
exports are expected to grow by 200 million bushels, or 12.5
percent, due to less competition from China and Brazil.
"Stocks of U.S. corn are expected to
grow from 1.086 billion bushels on Sept. 1, 2003, to 1.353 billion
on Sept. 1, 2004. World coarse grain stocks, however, are projected
to decline sharply for the fourth consecutive year. Significant
reductions in inventory this year are expected to occur in China,
the European Union and in Russia."
The USDA sees the 2003-04
marketing-year average price in a range of $1.90 to $2.20, compared
to the $2.32 average for the previous year. The current price is
near the low end of the projected range.
For soybeans, the small U.S. crop will
require a large reduction in consumption this year, Good noted.
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"The USDA has projected year-ending
stocks at a bare-bones level of 130 million bushels," said Good.
"Based on the experience of 1995-96 and 1996-97, it is unlikely that
stocks can be reduced to a lower level and still maintain the supply
pipeline. If that is the case, use of U.S. soybeans during the
current year will be limited to 2.515 billion bushels, 277 million
less than was used last year and the smallest annual use in seven
years.
"The USDA expects a 16 percent
reduction in exports and a 7 percent reduction in the domestic
crush. A reduced domestic crush will result in a rare decline in
domestic meal and oil consumption and a large decline in meal and
oil exports. Soybean oil exports are projected at 850 million
pounds, compared to 2.25 billion pounds during the year just ended."
Consumption of soybean meal and oil
outside of the United States is expected to increase this year, fed
by a much larger South American crop. The USDA now expects a 14
percent increase in soybean area and production in Brazil and a 5
percent increase in soybean area and a 4 percent increase in
production in Argentina.
The 2004 South American crop is
projected at 3.72 billion bushels, 340 million larger than the 2003
crop.
"Just like last year, when the
140-million-bushel decline in U.S. production was more than offset
by a 560-million-bushel increase in South American production, this
year's decline of 280 million bushels is expected to be more than
offset by a 340-million-bushel increase," said Good. "The USDA
projects the 2003-04 marketing-year average farm price in a range of
$6.05 to $6.95, up from the $5.53 average of last year. The current
price is near the upper end of the projected range."
With a large corn crop to be used and
significant rationing required in U.S. soybean consumption, the
market will continue to focus more attention on the rate of
consumption of each of those crops. In addition, the soybean market
will be influenced by the progress of the South American crop.
"Finally, the USDA November production
forecasts will be important in confirming crop size," said Good.
"Historically, there have generally been only small changes in the
U.S. average soybean yield forecast in November. The change has been
as large as one bushel only five times in the past 30 years.
One-bushel declines occurred in 1984 and 1993. In 1983, the year
with the most similar pattern to 2003, the average yield forecast
increased in November, and the final estimate was higher than the
November forecast.
"For corn,
there have been four times in the past 30 years when the yield
forecast declined in September and increased in October, as was the
case this year. The average yield forecast increased in November all
four years, by 1.1 to 2.8 bushels."
[University
of Illinois news release]
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