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"Futures prices for the 2007-08 marketing year have declined
substantially from contract highs reached in late February but
still point to very high average farm prices for the upcoming
marketing year," said Darrel Good. "At the close of trade on
April 27, futures prices translated into 2007-08 average farm
prices of about $3.60 for corn and $7.60 for soybeans." Good's
comments came as he anticipated the May 11 release of the USDA's
World Agricultural Outlook Board's release of its monthly update
of U.S. and world supply and consumption projections for a
number of commodities. The first projections for the 2007-08
marketing year will be included.
In addition, the National Agricultural Statistics Service
will release a forecast of the size of the 2007 U.S. winter
wheat crop.
"For corn, the persistent high rate of exports, along with
large unshipped sales as of April 19, had led to ideas that
exports for the current year could exceed the April projection
of 2.25 billion bushels," said Good. "Based on the USDA's weekly
Export Sales report, cumulative exports through April 19 totaled
1.386 billion bushels. Shipments averaged 42 million bushels per
week through the first 33 weeks of the year and need to average
45 million per week for the last 19 weeks of the year to reach
the current projection."
Inspections for the week ended April 26 totaled 41.6 million
bushels. Good said that it is unlikely that the World
Agricultural Outlook Board will raise the export projection in
the May report.
"Projected feed and residual use of corn could be influenced
by the forecast size of the 2007 winter wheat harvest," he
noted. "Most wheat feeding occurs during the summer months, so a
small wheat crop could boost feed use of corn."
More interest will be in the projections for the 2007-08
marketing year. Based on previous May projections, the
projection of the 2007 crop size will be based on the March 30
National Agricultural Statistics Service report of planting
intentions, the relationship between planted and harvested
acreage for 2001 through 2006 (omitting 2002), and a projected
yield based on the linear trend from 1960 through 2006 (omitting
1988) adjusted for 2007 planting progress.
"Harvested acreage will likely be projected at 83.2 million,
but more uncertainty centers around the yield projection, due to
the uncertainty about the likely planting progress adjustment or
any possible change in the methodology for calculating the
trend," Good said. "A projection near 150 bushels would result
in a production forecast of 12.48 billion bushels."
The market will also be very interested in the judgment of
the World Agricultural Outlook Board about likely consumption,
by category, of U.S. corn during the 2007-08 marketing year,
Good added.
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 "Some decline in exports may be anticipated due to larger crops
in the rest of the world," he said. "In addition, some decline in
feed use may also be expected due to reduced livestock feeding
margins and increased consumption of byproduct feed from ethanol
processing.
"Any such declines, however, will be more than offset by larger
projections of corn used for ethanol production, resulting in a
projection of relatively small year-ending stocks and a continuation
of relatively high prices."
For soybeans, changes in projections of use for the current
marketing year will likely be small, if any changes are made at all.
"The current pace of exports of U.S. soybeans, along with large
unshipped sales, suggest that exports for the year might exceed the
current projection of 1.08 billion bushels," said Good. "However,
the large South American harvest just being completed should result
in a sharp decline in the pace of U.S. soybean shipments through
September. Similarly, the larger-than-expected domestic crush in
March could prompt a small increase in the projection of the
marketing year crush.
"However, the large domestic inventory of soybean oil and meal
along with the large South American harvest should temper
expectations for the remainder of the marketing year. The outlook
for a record level of year-ending stocks of soybeans has not
changed."
The projection of the 2007 U.S. soybean crop will likely be based
on the National Agricultural Statistics Service report of planting
intentions, the five-year average planted-to-harvested acreage ratio
by states and a yield based on the 1978 to 2006 regional trend
yield.
"The projection of harvested acreage should be near 66.1
million," said Good. "The methodology for forecasting yield
potential is a little less transparent but resulted in a projection
of 40.7 bushels in May 2006. A projection near 41 bushels might be
expected this year, resulting in a production forecast of 2.71
billion bushels.
"Even with record-large stocks of U.S. soybeans on Sept. 1, 2007,
a crop of 2.71 billion bushels would result in a substantial decline
in stocks by Sept. 1, 2008. However, consumption during the 2007-08
marketing year would have to be more than 50 million bushels larger
than during the current year to reduce year-ending stocks to less
than 250 million bushels."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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