 Good's comments came as he reviewed corn, soybean and wheat
prices, all of which continue to be pressured by negative
economic news."Confirmation that the unemployment rate
continued to increase in November and crude oil prices were near
$40 per barrel pushed cash corn prices to the lowest level in
more than two years and soybean prices to the lowest level in
about a year and a half," he said. "The cash price of soft red
winter wheat dropped to a 2 1/2-year low."
Specific demand indicators for corn and soybeans remain
mixed, he added.
"There was rare good news for corn demand last week," he
said. "From Dec. 2 through Dec. 4, the USDA announced export
sales to Mexico totaling about 23 million bushels, with most to
be delivered during the current marketing year.
"The Chinese government announced that it would buy an
additional 200 million bushels of corn for the strategic
reserve. Export sales of corn to destinations other than Mexico,
however, remain very soft."
For the week ended Nov. 27, the USDA reported new sales to
all destinations totaled only 15.2 million bushels. New sales
over the past six reporting weeks averaged only 16.2 million
bushels. To reach the USDA projection of 1.9 billion bushels for
the year, new sales need to average about 29.5 million bushels
per week for the remaining three quarters of the marketing year
 .
"Corn demand is also receiving some modest support from
ethanol prices, which have not declined nearly as rapidly as
corn prices," Good added. "The average price of ethanol at Iowa
plants was quoted at $1.48 per gallon on Dec. 5. The price at
those locations is about 20 cents lower than in mid-October,
while wholesale gasoline prices have declined by about 70 cents.
"Prospects for hog prices to maintain 2008 levels in 2009 are
also slightly supportive for feed demand. That optimism is
partly offset by weakness in cattle prices and general pessimism
about meat demand if economic performance continues to weaken."
The USDA will update world production and consumption
forecasts on Dec. 11. The projection of use and year-ending
stocks of U.S. corn will be important not only for the current
marketing year, but will also have implications for the amount
of corn acreage that may be needed in 2009.
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"The current projection of year-ending stocks and ideas that
consumption will likely increase in the 2009-10 marketing year has
suggested the need to increase corn plantings by 4-5 million acres
in 2009," he said. "A slower rate of use and larger ending stocks
would imply that a smaller increase will be needed."
For soybeans, China continues to aggressively buy U.S. soybeans,
but the overall sales pace slowed during the most recent reporting
week. New sales for the week ended Nov. 27 totaled only 13.2 million
bushels, following an average of about 29 million during the
previous two weeks.
"The USDA will release a new forecast of the likely size of the
2009 South American crop on Dec. 11," said Good. "That forecast will
have some implications for likely competition for U.S. soybeans in
the export market during the last half of the marketing year.
"Reports on Dec. 11 will also contain updated projections for the
2008-09 marketing year ending stocks in the United States. The level
of those stocks will have implications for soybean acreage
requirements in the United States in 2009. Stocks over 200 million
bushels and a return to a trend yield in 2009 would warrant a 1.5-
to 2-million-acre reduction in U.S. soybean acreage in 2009."
For U.S. wheat, prospects of a larger crop estimate for Russia, a
stronger U.S. dollar and a lower export tax in Argentina all point
toward weakening export demand. The USDA will report winter wheat
seedings on Jan. 12, 2009.
"Seedings of soft red winter wheat are expected to be down
following the sharp increase in 2007," Good said. "A decline in soft
red winter wheat production in 2009 would allow some reduction in
the large inventory expected for the end of the current marketing
year."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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