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"The forecasts for both crops exceeded
most expectations," said Darrel Good.
At 11.613 billion bushels, the U.S.
corn crop forecast is 652 million larger than the September forecast
and 1.5 billion larger than the record crop of 2003. The forecast of
corn acreage harvested for grain, at 73.311 million, is 66,000 below
the previous forecast. The U.S. average yield is forecast at 158.4
bushels, nine bushels above the September forecast and 16.2 bushels
above last year's record yield. The average yield forecast declined
from September to October for only one of 33 states for which USDA
makes forecasts (Oklahoma). Large increases were registered for many
states, with both Illinois and Iowa having yield forecasts at 180
bushels.
"The large corn crop is expected to
result in a record level of domestic feed and residual use of corn,"
said Good. "The USDA forecast use in that category at 6.05 billion
bushels -- 200 million above the September forecast, 269 million
above last year's use and 186 million above the record use of
2001-02."
Domestic food and industrial use of
corn is forecast at 2.77 billion bushels, the same as forecast last
month and 195 million more than last year's use. Finally, exports
during the current marketing year are forecast at 2.075 million
bushels, 175 million more than shipped last year but 25 million
below the September forecast.
Year-ending stocks of corn are
projected at 1.691 billion bushels, 733 million larger than stocks
at the beginning of the year (Sept. 1).
"The projection reflects the largest
year-ending inventory since 2000-01," said Good. "The USDA projects
the marketing-year average price in a range of $1.75 to $2.15. Based
on the relationship between year-ending stocks and average farm
price over the past six years, the USDA's year-ending stocks
forecast suggests a marketing-year average price of $2.
"At the close of trade on Oct. 11,
the futures market reflected a marketing-year average price of $2,
assuming a three-year average basis and five-year average monthly
marketing percentages. It appears, however, that prices may have to
be lower than implied by year-ending stocks in order to encourage
livestock producers to use nearly 5 percent more corn this year than
was used last year. December 2004 futures will trade to new contract
lows and may test the 1999 and 2000 lows near $1.85."
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At 3.107 billion bushels, the 2004
U.S. soybean crop forecast is 271 million larger than the September
forecast, 653 million larger than the 2003 crop and 216 million
larger than the record crop of 2001. The forecast of harvested
acreage, at 73.99 million, is 335,000 larger than the previous
forecast and 1.015 million above the previous record of 2001.
The U.S. average yield is now
forecast at 42 bushels per acre, 3.5 bushels above the September
forecast, 8.1 bushels above the 2003 average and 0.6 bushels above
the previous record established in 1994. Again, only Oklahoma has a
lower forecast yield than reported in September.
"The USDA expects the larger crop --
and lower prices -- to result in more consumption of U.S. soybeans
than forecast last month," said Good. "Use for all purposes is
projected at 2.82 billion bushels, 62 million above the September
forecast and 295 million above last year's use but 113 million below
the record consumption of 2001-02.
"U.S. soybean exports are forecast
at 1.025 billion bushels, 25 million above last month's projection.
The increase reflects the 55-million-bushel reduction in the
forecast of the 2005 Brazilian crop."
Year-ending stocks of U.S. soybeans
are projected at 405 million bushels, 215 million above last month's
projection and the largest since 1986-87. The USDA projects the
marketing-year average price in a range of $4.70 to $5.50. At the
close of trade on Oct. 11, the futures market reflected a
marketing-year average price of $5.30, assuming a three-year average
basis and five-year average monthly marketing percentages. Based on
the relationship between year-ending stocks and the average farm
price over the past six years, the USDA's ending stocks forecast of
14.4 percent of use suggests a much lower average price.
"An average more in line with that
of 1999-2000 through 2001-02 seems more likely," said Good. "That
three-year average was $4.52. That average seems too low in relation
to the current market but suggests there is considerable downside
price potential unless the South American crop runs into trouble."
[University
of Illinois news release]
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