 "Not much is known about growing-season weather prospects at
this point," said Darrel Good. "The current La Nina is receding
and neutral La Nina/El Nino conditions are expected for the
summer months, but the correlation between those conditions and
U.S. growing-season weather is very low."The cool, wet start
to April in some producing areas threatens to delay the start of
corn planting. However, a more favorable weather pattern is
expected to develop after this week, and summer weather will
dominate any influence of a modest delay in corn planting."
Good's comments came as he reviewed the USDA's March 31
Prospective Plantings report, which revealed producer intentions
to reduce corn acreage and marginally increase soybean acreage
in 2009. That report pointed to the potential of tighter
supplies during the 2009-10 marketing year, and prices
strengthened modestly following the report's release.
"On April 9, the USDA released the monthly update of
projections of corn and soybean use during the current marketing
year and the projection of stocks at the end of the year," said
Good. "For soybeans, the projection of the marketing year crush
was reduced by 5 million bushels, and the projection of
marketing year exports was increased by 25 million bushels.
"Year-ending stocks are now projected at a five-year low of
165 million bushels. That projection represents 5.5 percent of
projected use during the current marketing year. The lowest
stocks-to-use ratio in modern history was 4.5 percent in
2003-04."
For corn, the same update projected domestic processing use
of corn during the current year reduced by 10 million bushels,
and the projection of feed and residual use increased by 50
million bushels due to the larger-than-expected use during the
second quarter of the marketing year.
"Year-ending stocks are now projected at 1.7 billion bushels,
or 14.1 per cent of projected use during the year," said Good.
"Projected stocks are at a three-year high, and the projected
year-ending stocks-to-use ratio is well above the recent low of
9.4 percent in 2003-04."
On May 12, the USDA will release its first projections of
2009-10 marketing year supply and use, Good noted.
"Corn use during the 2009-10 marketing year may exceed the
12.04 billion bushels projected for the current year," he said.
"The increase will be led by use for ethanol. Exports may also
expand as world grain production recedes from the record level
of 2008.
"The current corn harvest in Brazil and Argentina, for
example, is now estimated at 2.52 billion bushels, 650 million
bushels less than the 2008 harvest."
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Domestic feed use of corn will likely continue to decline during the
year ahead as a result of the current reduction in livestock numbers
and increased competition from distillers grain. Still, total use
next year could approach 12.5 billion bushels, Good added.
"Soybean consumption may increase modestly next year," he said.
"Some reduction in domestic and export consumption of meal will
likely keep the domestic crush relatively small, but export demand
should be strong.
"The 2009 South American soybean harvest is now estimated at
3.743 billion bushels, 515 million smaller than the 2008 harvest.
For both corn and soybeans, the timing and extent of U.S. and world
economic recovery will be important in determining the strength of
demand and the level of consumption."
Prices for the 2009 corn crop have not responded much to current
weather conditions, he noted, likely due to the experience of a year
ago when extensive delays in corn planting were followed by an
above-trend U.S. yield for corn. December 2009 corn futures briefly
traded to about $4.37 but have retreated to the $4.15-$4.20 area.
"Similarly, November 2009 soybean futures traded to $9.34 but
have leveled off even as prices for the 2008 crop have
strengthened," he said. "New-crop corn and soybean basis levels,
however, have strengthened modestly since early March."
Prices for the 2009 corn and soybean crops are above the spring
price guarantees for crop revenue insurance products, so even
insured producers face some downside price risk.
"That risk is about 15 cents for corn and near 45 cents for
soybeans," Good said. "With so much riding on the size of the 2009
crops, prices could well trade in a wide range over the next few
months.
"Opportunities to price a portion of those crops at prices above
those currently offered will likely be available."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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