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"That will change over the next few weeks as USDA reports are
released and as the South American growing season progresses,"
said Darrel Good. Good noted that several USDA reports with
implications for corn and soybean prices will be released over
the next four weeks. Markets will obviously react to other
developments, but these reports will provide important
fundamental information that will be helpful for refining price
expectations.
The monthly Cattle on Feed report to be released on Dec. 22
and the quarterly Hogs and Pigs report to be released on Dec. 27
will be important for assessing domestic feed demand for corn
and soybean meal.
"The rate of placement of cattle into feedlots and the
production intentions of hog producers will be of particular
interest," said Good. "Those estimates will reveal whether
producers have responded to the sharply higher feed prices and
lower livestock prices of the past two months."
Four reports will be released on Jan. 27 -- the annual Crop
Production report, the quarterly Grain Stocks report, the
monthly World Agricultural Supply and Demand Estimates report,
and the annual Winter Wheat Seedings report.
"The production report will contain the final estimates of
the size of the 2006 corn and soybean crops," Good noted.
"Historically during the 1970-2005 period, there has been a
small positive relationship between the change in the production
forecasts in November and the change in January. The smaller
forecast for corn and larger forecast for soybeans in November
of this year suggests the market may be anticipating a smaller
corn and larger soybean estimate again in January.
"The primary focus should be on the eastern Corn Belt, where
wet conditions and delayed harvest may have negatively affected
production. Because of strong demand and prospects for dwindling
U.S. and world stocks, the production estimate for corn will be
especially important."
The report of Dec. 1 inventories of corn and soybeans will
provide additional information about the rate of domestic use of
those crops. Good added that, again, the report will likely be
more important for corn, as it will allow the calculation of the
first-quarter feed and residual use.
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"The market is aware that corn exports have been large and that
domestic processing use of corn is expanding rapidly, but this
report will provide the first look at the largest component of use,"
he said. "For the 2006-07 marketing year, the USDA projects a 1.4
percent decline in domestic feed and residual use. The report will
indicate whether livestock producers have started adjusting to
tighter margins or whether that adjustment is yet to be made."
The monthly update of world supply and consumption projections will
reflect new information in the Crop Production and Grain Stocks
reports and will reflect any other important developments around the
world."Following the larger corn production
forecasts for South America and the larger soybean production
forecast for Argentina this month, the market will be especially
interested in the January projection for these crops," he said. "In
addition, any changes in prospective Chinese corn exports or soybean
imports would be important."
Good noted that the estimate of winter wheat seedings will
clearly be important for wheat price prospects, but it may have
strong implications for corn and soybean prices as well.
"It is expected that the report will show a large increase in
seedings of hard red winter wheat, due to the relatively high prices
experienced during the fall seeding season," he said. "Expectations
for soft red winter wheat are mixed. Anecdotal information suggested
that producers in the eastern Corn Belt and the Southeast intended
to increase acreage in response to high prices.
"The focus may be on Indiana, Ohio and Kentucky, to see if the
wet fall weather had an impact on seedings. The magnitude and
location of winter wheat seedings will have implications for
spring-planted crops, particularly for the challenge to increase
corn acreage by at least 10 percent in 2007."
Corn and soybean prices began their march higher in
mid-September. The average cash price of corn in central Illinois
reached a low of $2.09 on Sept. 12 and a high of $3.67 on Nov. 30.
"That price stood at $3.455 on Dec. 15," said Good. "For
soybeans, the low of $5.045 was established on Sept. 6, and the high
of $6.60 was reached on Nov. 30. That price was at $6.38 on Dec.
15."
[University
of Illinois College of Agricultural, Consumer and Environmental
Sciences news release]
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