"Wheat prices may receive additional
support from ongoing concerns about the condition of the hard red
winter wheat crop," said Darrel Good. "Prices for the 2003 corn and
soybean crops and prices for the 2004 crops of all three commodities
moved to new marketing-year highs following the reports.
"Expect prices to remain well-supported
as long as the rate of use remains high."
Good's comments came as he reviewed a
series of Jan. 12 USDA reports covering production, stocks, wheat
seedings, and supply and demand.
"The reports provided a large number of
surprises that should push corn, soybeans and wheat prices at higher
levels," he said.
In the case of corn, the 2003 U.S.
production estimate is at 10.114 billion bushels, 164 million below
the November forecast. The market was expecting an increase. The
lower production figure reflected a 330,000-acre reduction in the
estimate of planted acreage, a 626,000-acre reduction in the
estimate of acreage harvested for grain and a one-bushel reduction
in the estimate of U.S. average yield.
"For the 2002-03 marketing year, the
USDA shifted nearly 50 million bushels from the feed and residual
category to the food, seed and industrial category of use," said
Good. "For the current marketing year, feed use is now projected at
5.775 billion bushels, 75 million larger than last month's
projection and 182 million larger than last year's use.
"First-quarter disappearance this year
was much larger than expected."
Seed and processing use of corn is
projected at 2.48 billion bushels, 30 million above the December
projection and 134 million above last year's use. Finally, exports
are projected at 1.975 billion bushels, 50 million above last
month's projection and 383 million above last year's exports.
Year-ending stocks are projected at a meager 981 million bushels,
106 million below the level of stocks at the start of the year. The
U.S. average farm price is projected in a range of $2.15 to $2.45,
up from $2 to $2.40 projected last month.
"Corn production forecasts were also
lowered for Argentina, South Africa and Eastern Europe," said Good.
"However, those declines were more than offset by a larger forecast
for Brazil. The projection of Russia's feed grain crops was
increased, and the projection of Chinese corn exports was lowered by
about 20 million bushels."
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For soybeans, 2003 U.S. production is
estimated at 2.418 billion bushels, 34 million below the November
forecast and 33 million below the average trade guess. The estimate
of harvested acreage was reduced by 217,000 acres, and the U.S.
average yield estimate was reduced by four-tenths of a bushel. For
the 2002-03 marketing year, the estimate of seed and residual use
was reduced by 9 million bushels, and the estimate of Sept. 1, 2003,
stocks was increased by the same amount.
Good noted that, for the current year,
the projection of U.S. exports was increased by 10 million bushels
and the projection of the domestic crush was cut another 30 million
"These lower projections reflect the
small supply of soybeans and the assessment that year-ending stocks
cannot be reduced below about 125 million bushels," said Good. "The
USDA now projects U.S. soybean oil imports at 235 million pounds,
compared to 85 million projected last month and 46 million pounds
imported last year. Soybean meal imports are projected at 475,000
tons, up from last month's projection of 340,000 and last year's
imports of 166,000 tons."
For the rest of the world, the USDA
made no major changes in production forecasts. However, the forecast
of Chinese soybean imports was increased by 37 million bushels, and
the projection of Brazilian exports was increased by 15 million
bushels. For the year, the USDA projects the U.S. average farm price
in a range of $6.90 to $7.60, essentially unchanged from last
month's projection of $6.85 to $7.65.
For wheat, the USDA increased the
projection of U.S. exports for the current year by 25 million
bushels and lowered the projection of year-ending stocks by a
similar amount. At 559 million bushels, June 1 stocks are expected
to be only 68 million larger than stocks of a year earlier. The USDA
increased the projected size of the Indian wheat crop by about 85
million bushels. For China, this year's import projection was
doubled to 73 million bushels, but the projection of exports was
also increased to 62 million bushels.
"The biggest surprise for wheat was the
estimate that U.S. winter wheat seedings are nearly 1.5 million
acres, or 3 percent, below seedings of a year ago," said Good. "The
market had expected an increase in acreage. The largest decline, on
a percentage basis -- 7 percent -- was for white wheat. Hard red
acreage is down about 4 percent, while soft red wheat acreage is up
current marketing year, the USDA projects the U.S. average farm
price in a range of $3.25 to $3.45, 5 cents higher than the December
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