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"The market will now wait for the October report to confirm crop
size," said Darrel Good. "Over the past 36 years, there has been
a tendency for the corn production forecast to increase in
October following an increase in September. There is a similar,
but smaller, tendency for the soybean production forecast.
"However, with improving crop condition ratings, the market will
likely expect a larger soybean production forecast in October.
With prospects for corn inventories to decline significantly
this year and the need for U.S. producers to plant more corn in
2007, cash prices are expected to move significantly higher over
the next several months. The best chance for a recovery in
soybean prices is with a threat to the South American crop.
Longer term, however, soybean prices may have to work higher to
attract more acres into production in South America."
Good's comments came as he reviewed the USDA's September
forecasts of the size of the U.S. corn and soybean crops. Those
forecasts were larger than the August forecasts and about as
expected. Forecasts of consumption during the year ahead were
also increased, resulting in little change in the forecast of
average prices.
The U.S. corn crop is now forecast at 11.114 billion bushels,
138 million larger than the August forecast, almost identical to
the size of the 2005 crop and 693 million smaller than the
record crop of 2004.
"The U.S. average yield is forecast at 154.7 bushels, 2.5
bushels above the August forecast, 6.8 bushels above the 2005
average and 5.7 bushels below the 2004 record," he said. "The
projection of harvested acreage for grain is at 71.841 million,
250,000 below the August forecast and 3.266 million less than
harvested last year. The month-over-month decline in the
harvested acreage forecast was all in South Dakota."
As expected, the estimate of exports during the year ended on
Aug. 31 was increased by 50 million bushels, to a 10-year high
of 2.15 billion bushels. Sept. 1 stocks are forecast at 2.012
billion bushels.
"That inventory will be estimated in the USDA's September
Grain Stocks report to be released on Sept. 29," said Good. "For
the current marketing year, the USDA increased the forecast of
U.S. corn exports by 100 million bushels, to a 17-year high of
2.25 billion bushels, reflecting a small month-over-month
increase in the projection of world consumption and small
declines in the projection of exports from the Ukraine and the
European Union.
"With domestic consumption forecast at 9.665 billon bushels,
total consumption is expected to reach 11.915 billion bushels,
690 million above the record consumption during the year just
ended. Year-ending stocks are projected at 1.22 billion bushels,
12 million less than projected last month."
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Good added that the 2006-07 marketing year average farm price is
projected in a range of $2.15 to $2.55, the same as projected last
month and well above the average of $1.99 for the past year. The
projected ending stocks-to-use ratio of 10.24 percent suggests a
marketing year average price of $2.36."At the
close of trade on Sept. 11, the futures market appeared to be
trading an average farm price for the current marketing year of
about $2.45," he said.
The 2006 U.S. soybean crop is now forecast at 3.093 billion
bushels, 165 million larger than the August forecast, about equal to
the 2005 crop and only 31 million less than the record crop of 2004.
The U.S. yield is forecast at 41.8 bushels per acre, 2.2 bushels
above the August forecast but 1.5 bushels below the record yield of
2005. The highest average yields this year are expected in Indiana
and Nebraska, at 50 bushels; followed by Iowa, 49 bushels; and
Illinois, 48 bushels.
"The USDA estimates that the domestic crush during the year just
ended totaled 1.74 billion bushels, 15 million larger than the
August forecast," said Good. "Exports for the year are estimated at
945 million bushels, also 15 million larger than the August
forecast. Sept. 1 stocks were thought to total 485 million bushels.
Ending stocks were large, but the current estimate is 85 million
bushels less than the forecast of just three months ago."
For the current marketing year, the USDA expects the domestic
crush to increase by 25 million bushels, to a record 1.765 billion,
and exports to increase by 180 million bushels, to a record 1.125
billion bushels.
"The large export projection reflects expectations of a large
increase in imports by China and small declines in exports from
South America, even though the 2007 South American soybean crop is
projected to be slightly larger than the 2006 forecast," said Good.
"Even with a sharp increase in consumption, U.S. soybean stocks
on Sept. 1, 2007, are projected at 530 million bushels. The USDA
projects the 2006-07 marketing year average farm price in a range of
$4.90 to $5.90. The projected year-ending stocks-to-use ratio of
17.37 percent suggests an average farm price near $5.60. At the
close of trade on Sept. 11, the futures market appears to be trading
an average farm price near $5.45."
[University
of Illinois College of Agricultural, Consumer and Environmental
Sciences news release]
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