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"Still, the high prices offer the potential for good returns in
2007-08," said Darrel Good. His comments came as he reacted to
the USDA's June projection of world supply and consumption,
which contained a number of changes from the May report.
"These forecasts, however, will likely take a back seat to
unfolding crop prospects," he noted.
For corn, the USDA lowered the projection of U.S. exports for
the current year by 50 million bushels, to a total of 2.15
billion. That projection is 100 million bushels below the April
forecast and about equal to exports of last year. Year-ending
stocks are forecast at 987 million bushels, and the marketing
year average price is expected to be between $3 and $3.10,
compared with last month's expectation of $3 to $3.20.
"No changes were made in the projections of production and
consumption for the 2007-08 marketing year," he said. "Stocks on
Sept. 1, 2008, are projected at 997 million bushels, and the
average farm price for the year ahead is forecast in a range of
$3.10 to $3.70."
For soybeans, the USDA made no changes in the projections for
the current U.S. marketing year. The pace of the domestic crush
through April suggested that the projection for the year might
be increased. Projections for the 2007-08 U.S. marketing year
were also unchanged from May, except that the forecast of the
marketing year average price was increased by 15 cents, for a
range of $6.65 to $7.65.
"For soybean oil, the USDA increased the forecast of domestic
use during the current marketing year by 50 million pounds even
though the forecast of use for biodiesel production was reduced
by 150 million pounds, to a total of 2.4 billion pounds," Good
said. "For the 2007-08 marketing year, soybean oil used for
biodiesel production is forecast at 3.5 billion pounds, 300
million less than the May projection."
The estimated size of the recently harvested South American
soybean crop was increased by 60 million bushels, resulting in a
small increase in the projection of world stocks at the end of
the current marketing year.
First projections for the 2007-08 world marketing year
include a forecast of a modest increase in South American
soybean production in 2008.
"Most of the 100 million -- 2.4 percent -- increase is
expected to occur in Brazil," Good noted. "The Chinese crop is
expected to be about 20 million bushels smaller than the 2006
harvest, and Chinese imports are expected to grow by 15 percent
next year, to a total of 1.26 billion bushels. China is expected
to account for 46 percent of total world imports during the
2007-08 marketing year."
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 For wheat, the USDA reduced the forecast size of the 2007 U.S.
winter wheat crop by only 6 million bushels, to a total of 1.61
billion. At that level, production would be 311.6 million bushels
larger than the 2006 harvest.
Based on planting intentions, the 10-year harvested-to-planted
acreage ratios and a trend yield, the 2007 spring wheat crop is
forecast at 558 million bushels, the same as the May projection. The
forecast of 2007-08 marketing year U.S. wheat exports was increased
by 25 million bushels, to a total of 1 billion bushels, 90 million
more than the estimate for the year ended on May 31, 2007.
"The larger projection reflects expectations of deteriorating
crop conditions in the Ukraine," he explained. "The forecast of that
harvest was reduced by 131 million bushels -- 20 percent. Production
and export prospects were increased for Argentina."
On the surface, Good noted, the changes in the USDA projections
released on June 11 might be interpreted as slightly negative for
corn and soybean prices and supportive of wheat prices.
"However, the prospects of declining world inventories of feed
grains, wheat and oilseeds in an era of rapidly increasing
consumption will likely keep grain and oilseed prices well
supported," he said. "Threats to production of any of the major
crops have the potential to send prices sharply higher. Ongoing dry
conditions in western Australia and the eastern United States are of
particular importance.
"Crop condition ratings for the U.S. corn and soybean crops have
started at extremely high levels. As of June 3, 78 percent of the
corn crop and 71 percent of the soybean crop were rated in good or
excellent condition. It is highly unlikely that ratings at those
high levels can be maintained."
Some deterioration in ratings is expected to be reflected in the
report issued June 11, he added. Also, the lack of precipitation in
the near-term forecast for some of the driest areas is of concern.
November 2007 soybean futures just traded to a contract high of
$8.80, and November 2008 futures have reached the $9 mark. December
2007, 2008, 2009 and 2010 corn futures contracts are over $4, with
the deferred contracts reaching new highs.
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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