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"The average cash price of corn in central Illinois reached a
2006-07 marketing year high of $4.125 on Feb. 22," said Darrel
Good. "Prices moved lower in March, with a low of $3.16 reached
on April 3, following the release of the USDA's Prospective
Plantings report. Since then, prices have recovered by 50 cents,
with the average central Illinois' overnight bid at country
elevators quoted at $3.66 on May 4. "Part of the recovery in
cash prices has resulted from a strengthening of the basis. The
average spot cash bid was about 43 cents under July futures in
late March and early April but was only 25 cents under on May 4.
The basis in that area is now a bit stronger than the basis of a
year ago and only 5 cents and 7 cents weaker than in 2005 and
2004, respectively."
Good added that the stronger basis likely reflects a slowdown
in farmer sales of old-crop corn even as consumption continues
at a rapid pace. The new-crop basis is still generally weak,
with the harvest basis on May 4 about 16 cents weaker than the
previous four-year average.
In addition to the stronger basis, cash prices have moved
higher along with higher futures prices. July 2007 futures
peaked at about $4.60 in late February, declined to about $3.60
in early April and settled at $3.90 on May 4.
"Futures prices have been supported by a combination of a
continued high rate of consumption and delays in planting the
2007 crop," said Good. "The USDA reported that only 23 percent
of the crop was planted as of April 29. That compared to 48
percent planted last year and the 2002-2006 average progress of
42 percent.
"Progress was likely slow in western growing areas during the
week ended May 6. The slow progress raises concerns that some
intended corn acreage will not be planted and that yield
potential will be negatively impacted by the late planting."
The USDA will release an estimate of planted acreage on June
29. Until then, the market will focus on planting progress and
the weekly report of crop conditions. July and August weather is
most important for determining yields, but the late planting may
increase the risk of falling short of trend yields.
Since 1973, the central Illinois cash price of corn has never
established a marketing year high in February, Good noted.
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 "The same is true for December futures," he said. "There is no
fundamental reason that the February high this year cannot hold as
the marketing year high, but the late planting in combination with a
high rate of consumption and declining stocks adds to the
speculation that new highs will yet be established.
"Other than September (eight times), the cash price in central
Illinois has most often reached a high in July (seven times),
followed by June (five times) and August (four times)."
The average cash price of soybeans in central Illinois reached a
2006-07 marketing year high of $7.505 on Feb. 22, declined to $6.775
on April 24 and stood at $7.005 on May 4. The recovery since April
24 has resulted from a marginal (4-cent) strengthening of the basis,
which remains unusually weak, and a 19-cent increase in July
futures.
"In general, soybean prices are being supported by soybean oil
prices," said Good. "The cash price of soybean oil at central
Illinois plants is near 32 cents per pound, 28 percent higher than
prices of a year ago.
"At $187 per ton, the average central Illinois plant price of
soybean meal is only about 5 percent above the price of a year
earlier. The average country elevator spot cash bid for soybeans is
22.7 percent higher than the price of a year ago, even though the
basis is about 15 cents weaker."
Soybean oil prices continue to move higher even though domestic
inventories are at a record level. Stocks at plants at the end of
March were estimated at 3.354 billion pounds, 23 percent larger than
stocks of a year ago.
"Soybean oil prices are being supported by the global increase in
biodiesel production that is consuming larger quantities of canola
oil, palm oil and soybean oil," said Good. "The Census Bureau
estimates that 220 million pounds of soybean oil were used for
biodiesel production in the United States during March 2007. That
represents 13 percent of total domestic use and exports of soybean
oil during the month.
"Like corn prices, cash soybean prices in central Illinois have
never established a marketing year high in February, as has been the
case so far this year. Over the last 33 years, highs have tended to
occur in July (eight times), June (five times), September (six
times) and May (four times). For the current high to be exceeded,
some summer crop concerns will likely be required."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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