"While the U.S. average yield forecasts for both corn and
soybeans were increased in September and October, another small
increase in November would not be surprising," said Darrel Good,
referring to the upcoming forecasts on the size of the 2005 U.S.
corn and soybean crops and revised consumption forecasts for the
2005-06 marketing year.
"Reports of high yields in many areas of the Midwest persisted
through the end of harvest. In addition, there is a strong
historical tendency for larger yield forecasts in October to be
followed by even larger forecasts in November."
In the 35 years from 1970 through 2004, the USDA's October
soybean yield forecast exceeded the September forecast 18 times.
In those 18 years, the November forecast was higher than the
October forecast 15 times, unchanged once, and lower twice. For
corn, during that same 35-year period, the October average yield
forecast exceeded the September forecast 21 times. In those 21
years, the November forecast was larger than the October
19 times, unchanged once, and lower once.
"On the consumption side, there is some concern about the slow
start to the pace of U.S. soybean exports this year," said Good.
"Through the first 57 days of the 2005-06 marketing year, the
USDA reported cumulative soybean export inspection of 155
million bushels, compared to a total of 198 million at the same
time last year.
"For the year, the USDA has projected a 12-million-bushel
increase in U.S.
soybean exports, to a total of 1.115 billion. The slow start is
worrisome even though it is early in the season."
Good noted that in addition, unshipped sales as of Oct. 20 stood
218 million bushels, compared to 316 million at this time last
year. The slow pace of exports and export sales to date reflect
a slower buying pace by China.
"As of Oct. 20, total export commitments of U.S. soybeans to
China stood at
112.5 billion bushels, compared to 165.6 million bushels at the
same time last year," said Good. "In addition to the pace of
sales to China, U.S.
export prospects will be influenced by the development of the
South American crop. Early weather conditions there have been
less than ideal, with areas of dryness and areas of excessive
The pace of the domestic soybean crush is about as projected.
2005 crush of 133.2 million bushels is 7.9 percent of the
projected marketing year crush of 1.695 billion. That percentage
is near the average in previous years of ample soybean supplies.
"There are also concerns about the early pace of U.S. corn
exports," said Good. "Export inspections through the first 57
days of the marketing year were reported at 280 million bushels,
about nine million bushels ahead of last year's pace.
Inspections generally lag exports reported in the USDA's weekly
Export Sales report. Through Oct. 20, inspections lagged those
estimates by nearly six million bushels. Last year at this time,
the lag was bout 12 million bushels."
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Depending on the source of the estimate, cumulative exports are
about equal to those of a year ago, Good noted. However, unshipped
sales as of Oct. 20 stood at only 281 million bushels, 55 million
below outstanding sales of a year ago. For the year, the USDA
projects corn exports at two billion bushels, an increase of 185
million bushels from that of the past year.
"The rate of domestic feed and residual use of corn cannot be
measured until the release of the Dec. 1 Grain Stocks report in
mid-January," said Good.
"No change in the forecast for the 2005-06 marketing year is
expected in the November report.
"However, there is a general expectation that corn used for ethanol
production will exceed the current USDA projection. That forecast
could be altered in any monthly report, based on ethanol production
Good said that large supplies of both corn and soybeans will likely
keep futures prices under pressure in the near-term. December corn
futures established new contract lows every day last week and may
test last year's low of $1.91 if the projection of year-ending
stocks is increased next week.
November soybean futures rallied 55 cents from the Oct. 10 low of
$5.545, but have since dropped under $5.65. A projection of larger
year-ending stocks could result in additional declines, but
increasingly the market will be monitoring weather and crop
developments in South America for price direction, he said.
"Basis levels have improved in some areas," Good said. "From Oct.
18 through Oct. 28, the average central Illinois corn and soybean
basis strengthened by nine cents and 18 cents, respectively. Even
with the slight improvement of the corn basis--and cash prices--loan
(LDP) rates remain large, at 47 cents on Oct. 31.
"Small LDPs have been available for soybeans on a few occasions.
Additional LDP opportunities look likely. The price structure of
both corn and soybeans still favors forwarding pricing some of the