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"Given the level of anticipated year-end stocks, some switch is
probably needed," said Darrel Good. "The market will assess
needed acreage changes as the planting season approaches, and
price relationship will change to reflect that assessment. The
USDA's January winter wheat seedings report will provide some
indication of how producers may respond to higher production in
2006." Good's comments came as he looked ahead beyond the 2005
corn and soybean harvest. The 2005 crops of those commodities
are larger than expected, given the nature of the growing
season, and large enough to keep projected year-ending stocks at
adequate-to-surplus levels.
"In the near-term, prices will be influenced by the size of
the USDA's October and November production forecasts," said
Good. "Assuming that the crops are at least as large as
currently projected, significant price recovery over the next
five months will likely require a higher rate of consumption
than currently projected or concerns about South American crops.
"U.S. weather and crop prospects will become a major factor
in the last half of the marketing year."
Good noted that domestic consumption of corn occurs in two
categories, feed and processing. The rate of feed and residual
use can be monitored based on the USDA's quarterly grain stocks
report. The first report for the 2005-06 marketing year is for
Dec. 1, but it is not released until the second week of January
2006, the same time as the final estimate of the size of the
2005 crop is released.
"Growth in domestic processing use is occurring only in the
ethanol category," said Good. "Monthly estimates of ethanol
production provide an indication of the rate of use of corn in
that category."
The most frequent data on consumption is in the export
category. The USDA releases a weekly export inspections report
and a weekly report on export sales. The Census Bureau releases
a monthly report of exports, about six weeks after the end of
the month.
"The market will tend to focus on the rate of corn exports to
gauge whether exports will differ from the USDA's marketing-year
projection of 2 billion bushels," said Good. "Exports need to
average 38.5 million bushels per week to reach that projection."
Export inspections are currently available for the first
three weeks of the 2005-06 marketing year, and export estimates
from the export sales report are available for just two weeks.
Generally, the estimates in the export sales report are nearer
the Census Bureau estimates than are the estimates in the
inspections report.
"Shipments to date have been negatively impacted by hurricane
damage and are not reflective of the demand for U.S. corn," Good
noted. "A clearer indication of export demand comes from the
weekly report of new sales. As of Sept. 15, 361 million bushels
of corn had been sold for export this year, with just over 53
million bushels of that total actually shipped."
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Sales this time last year totaled 375 million bushels.
"New sales need to average nearly 33 million bushels per week
to be on target for shipments of 2 billion bushels," Good said.
"Sales over the last month have averaged 27.6 million bushels
per week."
For soybeans, the market can monitor the rate of exports from
the same reports as for corn. The USDA projects marketing-year
exports at a record 1.115 billion bushels. Through Sept. 15,
about 196 million bushels had been sold for export this year,
with only 11.5 million bushels actually shipped.
Sales need to average about 18.5 million bushels per week to
be on track with the USDA projection.
"However, sales and shipments are much larger in the first
half of the marketing year than the last half, due to the
availability of South American supplies, so the weekly rate
needs to be very large right now," said Good. "Sales are
currently fairly robust, averaging nearly 22 million bushels per
week over the past month, but total sales are still running 30
percent behind the total of a year ago. The rate of domestic
processing of soybeans is provided by the Census Bureau in
monthly reports released about three weeks after the end of the
month."
Good added that there is more uncertainty than usual with
respect to the potential size of the upcoming South American
soybean crop.
"Typically, annual acreage increases are anticipated for
Brazil, with uncertainty centered around weather and yield,"
Good said. "This year, however, most expect some decline in
Brazilian soybean acreage and perhaps reduced levels of inputs
due to poor economics -- low soybean prices, high input costs
and an unfavorable exchange rate. The USDA and others will
provide estimates of acreage over the next several months."
For corn, Good said, there is some confidence in a typical
seasonal price pattern for 2005-06.
"That pattern would result in the lowest cash prices during
harvest and the highest cash prices next spring-summer, with the
majority of the increase coming in the form of basis
appreciation," he said. "For soybeans, the likely seasonal
pattern is not as clear. Prices will likely move lower as
harvest progresses. Basis levels will likely strengthen after
harvest, but the post-harvest price level will be influenced by
the development of the South American crop."
[News release from the
University of Illinois College
of Agricultural, Consumer and Environmental Sciences] |
