Weekly Outlook:

Corn and soybean price recovery

[November 04, 2008]  URBANA -- Larger corn and soybean production forecasts on Nov. 10 would likely slow the recovery in corn and soybean prices, while a surprise reduction in crop size might provide some modest support, said a University of Illinois Extension marketing specialist.

"A substantial recovery in corn and soybean prices, however, likely hinges on improved demand prospects that would come with stronger financial and energy markets," said Darrel Good.

Good's comments came as he reviewed corn and soybean prices, which have increased modestly from the marketing year lows of mid- to late October.

The average cash price of corn in central Illinois reached a low of $3.33 on Oct. 24, recovered to $3.825 on Oct. 29 and stood at $3.645 on Oct. 31. The average cash price of soybeans in the same area reached a low of $8.055 on Oct. 15, recovered to $9.09 on Oct. 29 and stood at $8.94 on Oct. 31.

"The price of corn was 5 1/2 cents higher than on the same date in 2007, while the price of soybeans was 79 cents lower," Good noted.

For the most part, prices of corn and soybeans have been influenced by developments in the financial, energy and currency markets, Good said.

"In addition, prices have received some direction from the pace of exports and export sales," he said. "Corn exports and export sales continue to be relatively weak. Total export commitments -- shipments plus outstanding sales -- stood at 6.56 million bushels as of Oct. 23. Export inspections were very small for each of the two latest reporting periods, ended on Oct. 30.

"New sales need to average about 24 million bushels per week in order for marketing year exports to reach the USDA projection of 1.95 billion bushels. New sales for the last reporting week, ended Oct. 23, were only 16 million bushels. Sales are running 40 percent behind the pace of a year ago, with sales to each of the largest importers of U.S. corn lagging the pace of a year ago. These importers include Japan, Taiwan, South Korea and Mexico."

In contrast to corn export sales, sales of U.S. soybeans have been large. As of Oct. 23, total export commitments stood at 524 million bushels, nearly 14 percent larger than sales of a year ago. The USDA has projected a 12 percent year-over-year decline in exports.

"Export inspections were especially large in the two weeks ended on Oct. 30," he said. "Sales of U.S. soybeans to China are running nearly 16 percent above the pace of a year ago.

"While early export sales of U.S. soybeans have exceeded expectations, a slowdown is likely to occur as the marketing year progresses. The USDA has projected that, for the year, China will import slightly fewer soybeans from all sources than were imported last year."

Good added that prices of corn and soybeans have also responded to changes in the prospective size of the 2008 U.S. harvest. The USDA's revised acreage and production forecasts released on Oct. 28 provided some modest support for prices. Those revisions resulted in a 45-million-bushel reduction (1.5 percent) in the forecast size of the soybean harvest and a 167-million-bushel reduction (1.4 percent) in the forecast size of the corn harvest.

"The USDA will release the final yield and production forecasts of the season on Nov. 10," he said. "Any changes in that report should be centered on yield forecast.

"The recent history of changes in soybean yield forecast from October to November provides little guidance for expectations this year."

Over the past 10 years, the November U.S. average yield forecast has been above the October forecast five times and below five times. From 1979 through 1997, however, the November yield forecast exceeded the October forecast 68 percent of the time.

"The season-ending crop condition ratings may also provide some insight into expected change in the November yield forecast," he noted. "At the end of the 2008 season, 57 percent of the crop was rated good or excellent, suggesting a U.S. average yield of 42.7 bushels. That is 3.2 bushels above the October forecast.

"Over the past 35 years, however, the largest increase in the soybean yield forecast in November was 1.4 bushels (1990)."

For corn, the November U.S. average yield forecast has exceeded the October forecast in seven of the past 10 years.

"In fact, the November forecast has exceeded the October forecast 70 percent of the time since 1975," said Good. "The percent of the U.S. corn crop rated good or excellent at the end of the season has explained 88 percent of the annual variation in the U.S. average trend-adjusted yield since 1986.

"This year, 64 percent of the crop was rated in good or excellent condition at the end of the season, pointing to a U.S. average corn yield of 154.4 bushels, 0.5 bushels above the October forecast."

[Text from file received from the University of Illinois College of Agricultural, Consumer and Environmental Sciences]