 "If problems in those markets lead to weakening U.S. and world
economies, the demand for both food and energy could also
weaken, with direct implications for corn and soybean prices,"
said Darrel Good. "Similarly, any evidence that those financial
issues have been adequately addressed and the worst is over
would suggest a more stable demand scenario."Good's comments
came as he reviewed corn and soybean prices, which continue to
be influenced by a wide array of factors, resulting in a very
unstable price pattern. Over the past week, December 2008 corn
futures traded in a range of 55 cents. In the past seven trading
sessions, November 2008 soybean futures traded in a range of
about $1.20.
"On a daily basis, prices have been influenced by changes in
the value of the U.S. dollar, changes in crude oil prices,
export news, weather and production expectations, and
developments in financial markets," he said. "In general, a
weakening of the U.S. dollar has been viewed as positive for
export prospects and therefore for prices of corn and soybeans.
A strengthening of the dollar has been viewed as a negative for
both."
Lower crude oil prices are generally viewed as having a
negative impact on crop prices due to the relationship between
the price of gasoline and the price of biofuels and the
resulting profitability of biofuels production.
"Higher crude oil prices, then, are viewed as positive for
corn and soybean prices," said Good.
The pace of U.S. corn export sales and shipments continue to
lag the pace of a year ago. During the first 2.5 weeks of the
2008-09 marketing year, the USDA reports export inspections of
only 77 million bushels, compared with 123 million bushels
during the same period last year.
Through Sept. 11, the USDA's report of export sales showed
total export commitments (shipments plus outstanding sales) for
the current year at 488.5 million bushels, compared with 735.3
million on the same date last year.
"The 33.6 percent decline in commitments compares to the
USDA's projection of a 17.5 percent drop in exports for the
year," said Good. "Sales to most of the largest buyers of U.S.
corn -- Japan, South Korea, Taiwan and Mexico -- are lagging the
pace of a year ago."
The early pace of U.S. soybean exports is also lagging the
pace of a year ago, but unshipped sales are larger than sales of
a year earlier. In the first 2.5 weeks of the year, export
inspections totaled 10.8 million bushels, compared with 38.1
million in the same period last year.
"However, as of Sept. 11, the USDA reported total export
commitments of about 344 million bushels, compared to 317
million on the same date last year," he said. "The USDA projects
a 13.4 percent drop in exports this year, but early commitments
exceed those of a year ago by almost 9 percent. Japan and South
Korea account for much of the year-over-year increase."
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World wheat, coarse grain and soybean production are expected to be
record large in 2008-09. Wheat production is expected to be large
enough to result in an increase in year-ending stocks for the first
time in four years.
Current wheat production concerns center around Argentina and
Australia, where dry weather continues to threaten crop development.
Earlier this month, the USDA lowered the production forecast for
Australia by 12 percent and the forecast for Argentina by 7 percent.
"World coarse grain stocks are expected to decline, and world
soybean stocks are expected to increase modestly," Good said. "The
increase in soybean stocks, however, is dependent on the size of the
2009 South American harvest."
Good said that for the near term much of the projection focus
will continue to be on the size of the U.S. corn and soybean crops.
"It appears the late-maturing crops will not be impacted by a
widespread early freeze," he said. "However, the drop in yield and
production forecast for both crops earlier this month may point to a
further decline in October."
Since 1970, there has been a modest correlation between the
change in the production forecast in September and the change in
October. The correlation is stronger for corn than for soybeans
 .
"The October report, however, will contain more complete
information about planted, and therefore harvested, acreage of both
crops, which may impact the production forecasts," he said.
For now, both corn and soybean prices appear to be in a broad
trading range.
"For December 2008 corn that range extends from about $5 to
$6.25" said Good. "The current price is near the middle of that
range.
"For November 2008 soybean futures, that range extends from about
$11 to about $13, and the current price is also near the middle of
that range."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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