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"In many years, the price prospects for
corn and soybeans have generally settled at this time in the
marketing year and the market turns to new crop prospects for price
direction. This year, however, the market must deal with
considerable uncertainty about demand as well as prospects for 2004
crops," said Good.
On May 10 the USDA will release its
monthly update of U.S. and world supply and consumption forecasts.
That report will contain the first projections of supply,
consumption, stocks and average price for the 2004-05 marketing
year.
"For the current corn marketing year,
the projections are expected to confirm prospects for record use and
small ending stocks," said Good. "Weekly sales of U.S. corn for
export during the current marketing year were generally large for
the seven-week period ended April 22. Somewhat surprisingly,
however, shipments of U.S. corn were relatively small during the
three weeks ended on April 29. The market will be eager to see if
the USDA alters the export projection from the current
2-billion-bushel forecast."
He says domestic use of corn remains
well-supported by expanding ethanol capacity and may be getting a
boost from unexpectedly high hog prices. These higher prices offset
much of the impact of higher feed prices, suggesting that hog
producers may be slow to shrink the breeding herd.
The projected size of the 2004 winter
wheat crop and the impact on wheat prices may also have implications
for the feed demand for corn during the summer months.
"With prospects for small U.S. and
world grain inventories at the end of the current marketing year,
the market will be very sensitive to 2004 growing season
developments," said Good. "For the 2004-05 U.S. corn marketing year,
it is expected that the USDA will project a large crop but small
year-ending stocks.
Good says the projections for Chinese
corn production and exports will be of major interest.
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The average price projection for the
2004-05 marketing year will likely exceed the projection for the
current marketing year. Based on the average price in mid-April, and
assuming that the 2003 crop has been marketed in a typical fashion,
the average U.S. farm price received during the first eight months
of the 2003-04 marketing year was only $2.37.
"With only about a quarter of the crop
left to be sold, a continuation of prices at the current level would
result in an average for the year near $2.55," said Good.
For the current U.S. soybean marketing
year, the USDA may tweak the forecasts of the size of the domestic
crush and exports, but the most interest will be in the projection
of marketing-year average farm price. This projection will give some
insight into what price levels the USDA expects to be required to
stretch available supplies until harvest.
"Based on the average price in
mid-April, and assuming a typical farm marketing pattern for the
2003 crop, the average price received through the first eight months
of the marketing year was about $7.38. If price remains near the $10
level for selling the last 20 percent of the crop, the average price
for the year will be near $7.90," said Good.
The size of the 2004 South American
soybean crop will have larger implications for the 2004-05 marketing
year than for the remainder of the 2003-04 marketing year. With the
Brazilian harvest nearing completion, there are still considerable
differences of opinion about the size of that crop.
"Recent estimates from Brazil differ by
more than 100 million bushels," said Good.
For the 2004-05 U.S. soybean marketing
year, the USDA is expected to forecast a large crop, reflecting an
increase in acreage and a trend yield; some increase in year-ending
stocks; and a lower average farm price than projected for the
current year. Projections for the 2004-05 marketing year for the
rest of the world will not be made until July.
"A
projection of increased soybean area, trend yields and record
production in South American in 2005 would not be surprising," said
Good.
[University
of Illinois news release]
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