"First, there will be ongoing uncertainty about supply and
consumption that will generate the usual movement in prices," said
Darrel Good. "Second, there appears to be a fair amount of
uncertainty about what corn and soybeans are worth for any given
set of supply and consumption forecasts."
Good's comments came as he reviewed recent USDA reports. On May
12, USDA released the first projections of supply, consumption,
stocks and average price for the 2005-06 corn and soybean
marketing years. These projections provide a starting point for
evaluating supply and demand developments as they unfold over the
The first projections for the 2005-06 U.S. corn marketing year
were a bit negative for price prospects, Good noted.
"Using the March corn planting intentions and an average yield
about 2 percent above trend value, the 2005 crop is projected at
10.985 billion bushels," said Good. "That projection is 822
million smaller than the 2004 crop but 425 million larger than the
expected level of consumption during the current marketing year.
"For the year ahead, USDA projects a very modest 110 million
bushel increase in consumption of U.S. corn. Feed and residual use
is expected to decline by 150 million bushels due to increased use
of non-grain feed ingredients and to a decline in 'residual' use
from the high level of the current year."
Use of corn for ethanol production is expected to grow at a
much slower rate next year -- 7 percent -- than during the current
year -- 20 percent. The use of corn for all food, seed and
industrial purposes is expected to grow by 110 million bushels, or
"U.S. corn exports during the year ahead are expected to
increase by 150 million bushels over the disappointing shipments
of the current year," said Good. "Consumption of corn outside the
United States is expected to increase by only about 0.5 percent,
or 88 million bushels, but the United States is expected to
increase export market share at the expense of China and South
Stocks at the end of the 2005-06 marketing year (Sept. 1, 2006)
are projected at 2.54 billion bushels, an increase of 325 million
bushels from the expected level of stocks at the end of the
current marketing year. The projected stock-to-use ratio is 23.8
percent, compared with 21 percent this year and 9.4 percent last
[to top of second column in this article]
"The 2005-06 marketing-year average farm price of corn is
projected in a range of $1.55 to $1.95, down from the $2 to $2.10
level expected for this year," said Good. "At the close of trade
on May 13, the futures market was offering a 2005-06
marketing-year average price near $2.12, 37 cents above the
midpoint of the USDA's projected price range. The midpoint of the
USDA's projected price range is near the projected price based on
the relationship between ending stocks and price during the period
1998-99 through 2003-04. That projection, using USDA supply and
consumption forecasts, is $1.78.
"On the other hand, the market price is near the average
projected by the relationship between stocks and price during the
period 1989-90 through 1997-98. That projection is $2.19."
Using March planting intentions for soybeans and a projected
yield of 39.9 bushels per acre (based on 1978-2004 regional trend
analysis), the USDA projects the 2005 U.S. soybean crop at 2.895
"That projection is 246 million smaller than the 2004 crop and
8 million bushels smaller than expected use during the current
marketing year," said Good. "For the year ahead, the USDA projects
a 40-million-bushel increase in the domestic soybean crush, driven
by a 2.5 percent increase in both meal and oil consumption.
Exports are expected to increase by 25 million bushels.
"Stocks at the end of the 2005-06 marketing year are projected
at 290 million bushels, 65 million less than expected inventories
at the end of the current marketing year. The year-ending
stocks-to-use ratio is projected at 9.8 percent, compared to 13.6
percent this year and 4.6 percent last year."
The 2005-06 marketing-year average farm price of soybeans is
forecast in a range of $4.70 to $5.70, compared with the average
of $5.65 expected this year. At the close of trading on May 13,
the futures market was offering a 2005-06 marketing-year average
price near $5.86, 66 cents above the midpoint of the USDA's
forecast price range.
"Using USDA's supply and consumption forecasts and the
relationship between stocks and price during the period 1989-90
through 1997-98, the 2005-06 marketing-year price would be
expected to be near $6.16, 30 cents above the current market,"
said Good. "Using the relationship between stocks and price during
the period 1998-99 through 2003-04, the average 2005-06
marketing-year price would be expected to be near $4.70, equal to
the low end of the USDA's projected range."
[University of Illinois news release]