 "In the first trading session following the announcement of
incidences of swine flu in Mexico and the United States, corn,
soybean and wheat futures declined sharply," said Darrel Good.
"Market participants reportedly are concerned that the threat of
swine flu will reduce pork demand, stimulating further
liquidation of hog numbers and resulting in reduced feed
demand."Such negative reaction, Good noted, is typical with
episodes that create so much uncertainty.
"Russia reportedly announced restriction on pork imports from
Mexico and selected origins in the United States," he said.
"Restrictions by other importers would not be surprising.
"Health experts indicate that swine flu is not transmitted to
humans through properly prepared pork. The hope is that the
initial knee-jerk reaction will be followed by more thoughtful
responses. The extent of reported cases of swine flu will be
important in determining the depth of demand worries."
Good said a number of other fundamental factors continue to
influence crop prices. For soybeans, the Census Bureau reported
that the domestic crush during March totaled 144.7 million
bushels, 7.2 percent smaller than the crush of a year earlier.
During the first seven months of the 2008-09 marketing year,
the domestic crush has totaled 987.1 million bushels, 9.6
percent less than crushed during the same period last year. For
the year, the USDA has projected the domestic crush at 1.635
billion bushels, 9.2 percent less than the crush in the previous
marketing year.
"Soybean exports and export sales remain robust as Chinese
buying remains strong in the face of a smaller South American
crop, particularly in Argentina," said Good. "USDA's weekly
export inspection report showed cumulative marketing year
exports through April 23 at 1 billion bushels.
"During the first six months of the marketing year, Census
Bureau estimates of soybean exports exceeded USDA estimates by
42 million bushels. If that margin persists, exports during the
last 18.5 weeks of the marketing year need to total only 170
million bushels to reach the USDA's projection of 1.21 billion."
As of April 16, he added, unshipped export sales were
reported at 148 million bushels. It appears that exports will
reach or perhaps exceed the USDA projection.
For corn, cumulative export inspections through April 23
totaled 1.08 billion bushels. During the first half of the
marketing year, Census Bureau corn export estimates exceeded
USDA inspection estimates by 35 million bushels.
"If that margin persists, exports during the final 18.5 weeks
of the year need to total 585 million bushels -- 31.5 million
per week -- to reach the USDA projection of 1.7 billion
bushels," said Good. "As of April 16, unshipped export sales
were reported at 388 million bushels.
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"New sales need to average about one-half million per week. That
increase in the weekly rate of shipments and sales over the past
month is encouraging and suggests that the USDA projection is
reachable."
The more troubling development for corn comes from California,
where actions that could limit the growth of ethanol consumption in
that state are under consideration.
"While decisions are not final, the initial indication is that
California's calculation of the indirect land use implication of
corn-based ethanol increases the ‘carbon footprint' of ethanol and
makes it less attractive in reducing carbon emissions in the state,"
he said.
"Any restriction on ethanol use would not occur in the near term,
but raises concern about longer-term ethanol demand in California.
Lower crude oil and gasoline prices currently being experienced also
provide a tone to ethanol demand."
On the supply side, corn planting remains slower than normal, and
weather forecasts suggest rain delays will continue into early May.
"The market has been slow to show concerns about the slow pace of
planting," said Good. "The lack of concern stems in part from the
apparent lack of production loss from late planting and replanting
in many areas last year. A year ago, however, the corn crop
benefited from nearly ideal weather conditions in July and a
favorable growing season that continued well into September."
The large number of factors influencing the corn and soybean
markets suggests that prices will likely continue to be very
volatile but extremely difficult to anticipate.
"For the 2009 crop, pricing decisions can still be anchored to
the spring price guarantees for crop revenue insurance," he said.
"Spikes well above those guarantees provide an opportunity for some
small sales."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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