 "The trend in wheat prices is still down," said Darrel Good.
Good's comments came as he reviewed the USDA's November Crop
Production report, along with the monthly update of world supply
and consumption prospects -- all of which contained a number of
changes from the October reports.
"Those changes, however, did not alter the overall
fundamental picture for the corn, soybean or wheat markets," he
said.
As generally expected, the forecast of the 2007 U.S. average
corn yield was reduced from the October forecast. At 153
bushels, the U.S. average yield forecast is 1.7 bushels below
the October forecast and 2.8 bushels below the September
forecast.
"The October-to-November decline reflected reductions of five
bushels in Iowa and Minnesota and six bushels in Nebraska," said
Good. "The forecast is 4.4 bushels above the long-term trend
value for 2007 and 3.6 bushels above the projected yield based
on year-end crop condition ratings.
"The 2007 crop is now forecast at 13.168 billion bushels, 150
million smaller than the October forecast."
The yield forecasts for 2007 have followed the same pattern
as in 1990 and 2006 -- higher in September and lower in both
October and November. In each of those previous years, the
January yield estimate was below the October forecast. A similar
decline this year would result in a January estimate of about
152 bushels and a crop of 13.083 billion bushels.
On the consumption side, the USDA lowered the projection of
feed and residual use of corn during the current year by 50
million bushels, to a total of 5.65 billion bushels.
"The reduction is a little surprising given the record level
of hog production that is under way," Good noted. "Year-ending
stocks are projected at 1.897 billion bushels. If the 2007 crop
was a bit smaller than the current forecast and feed and
residual use or exports are larger than forecast, ending stocks
might be near 1.765 billion bushels.
"The magnitude of expected year-ending stocks will be one
factor in determining the magnitude of corn acreage required in
2008."
For soybeans, the forecast of the 2007 U.S. average yield was
reduced by one-tenth of a bushel to 41.3 bushels. The forecast
of the average yield has been remarkably consistent this year,
ranging from 41.5 bushels in August to 41.3 bushels in November.
"For some reason, the market anticipated a small increase in
the yield and production forecast in this month's report," he
said. "The production forecast is 4 million bushels smaller than
the October forecast and 594 million smaller than the record
crop of 2006."
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No changes were made in the forecast of soybean exports or domestic
crush for the current year, although the forecasts of both soybean
meal and oil exports were increased from the October projections.
The increase in expected soybean oil exports was offset by a lower
projection of domestic use as soybean oil continues to lose market
share to other vegetable oils.
"Even though soybean oil is expected to remain in surplus, prices
are expected to be record-high, averaging between 37.5 cents and
41.5 cents per pound," he said. "The previous marketing year high
was 31.6 cents in 1973-74, followed by 31 cents last year.
"High soybean oil prices reflect high crude oil prices, as those
high prices stimulate the demand for biodiesel."
Expectations for the size of the 2008 South American crop were
little changed from October, although a slightly larger crop is
expected in Paraguay due to higher yield expectations. The 2008
South American crop is projected at 4.35 billion bushels, 130
million larger than the 2007 crop.
"A crop of that size would likely require U.S. producers to
increase soybean acreage in 2008," said Good. "However, if the 2008
average South American yield is equal to the 2007 yield, the crop
will be 260 million larger than the 2007 harvest, with slightly
different implications for U.S. acreage.
"It is still too early, then, to forecast the U.S. acreage
response in 2008."
For the current wheat marketing year, the USDA increased the
forecast of both imports and year-ending stocks by 5 million
bushels. The estimate of foreign wheat production was increased by
about 105 million bushels. The largest increase, 37 million bushels,
was for China. World wheat inventories will remain extremely tight,
but not as tight as forecast last month.
"The focus in the wheat market is now on potential crop size in
2008," he said. "A significant increase in world wheat acreage is
expected as a result of record-high prices."
Harvested acreage worldwide is estimated at 535 million for the
current marketing year, which is above the 523 million harvested
last year, but the world average yield was about three-tenths of a
bushel lower than last year.
"World production has been small for two consecutive years," said
Good. "The recent peak in world wheat acreage was 570 million in
1996-97.
"A return to that level is not expected, but an increase of just
3 percent with average yields would produce a 2008-09 crop of 23.38
billion bushels, 5.5 percent larger than this year's harvest. A crop
of that size would result in a significant increase in world wheat
inventories."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences] |
