Good reported that the December 2012 corn futures declined by $1.44,
or 17 percent, from the high on Aug. 10 to the recent low on Sept.
28. That contract has managed a recovery of about 40 cents so far
this month. November 2012 soybean futures declined by $2.85, or 16
percent, from the high on Sept. 4 to the low on Oct. 3 and have
rebounded about 45 cents since then.
"A change in the trend of lower prices will require an additional
supply shock or evidence that supplies have not been sufficiently
rationed," Good said. "On the supply side for corn, prospects of a
bumper crop in China and expectations that production in Argentina
will rebound and Brazilian production will remain large in 2013
continue to weigh on U.S. export prospects."
Good said that expectations of substantial imports of corn -- 75
million bushels or more -- into the United States this year also
offset some of the concerns about the shortfall in the U.S. crop.
"Declining production prospects for the Australian wheat crop and
dryness in some U.S. winter wheat areas have not provided much
support for corn prices to date," Good said.
"For soybeans, expectations are for a sharp recovery in South
American soybean production to record levels in 2013, providing
sufficient world supplies in the last half of the 2012-13 marketing
year," he said.
"Declining prospects for the current Canadian canola crop have
not resulted in much support for soybean prices," Good continued.
"With expectations of very large crops in South America in 2013,
some supply shocks are still possible, but there are no immediate
threats to those crops."
In the short run, the USDA's forecast of the size of the U.S.
corn and soybean crops, to be released on Oct. 11, will be the most
important supply information, Good said.
"There are growing expectations that the forecast of the U.S
average soybean yield will be increased, adding as much as 175
million bushels to the forecast of crop size," Good said. "For corn,
expectations about crop size are more mixed, with yield expectations
running from slightly below the September forecast to as much as 5
bushels above that forecast. The estimate of planted acres is
expected to exceed the June estimate, but there is much more
uncertainty about the estimate of acreage harvested for grain. The
USDA has already indicated that the difference between planted
acreage and acreage harvested for grain will be larger than normal,
but the October report will provide more information about the
likely magnitude of that difference. For both corn and soybeans,
history suggests that the October production forecasts will be
reasonably close to the final estimates," Good said.
For corn consumption, the pace of exports accelerated in
September but remained below the rate needed to reach even the very
small USDA forecast for the year.
"New export sales during September were extremely small, so that
the magnitude of outstanding sales on Sept. 27 was 42 percent
smaller than on the same date last year," Good said.
[to top of second column]
"Weekly ethanol production during September averaged about 6
percent less than in September 2011 and was 9 percent less in the
week that ended Sept. 28. Production is running slightly ahead of
the pace implied by the USDA's forecast of a 10 percent reduction in
the use of corn for ethanol during the current marketing year," he
According to Good, corn prices got a temporary boost from the
USDA's estimate of Sept. 1 corn stocks, which seemed to imply a
higher-than-expected rate of feeding. However, he said there has
been a growing understanding that the stocks estimate revealed
little about the pace of corn feeding, since so much new-crop corn
was available before Sept. 1.
"As a whole, the current pace of corn consumption suggests that
the smaller supplies are being sufficiently rationed," Good said.
For soybeans, the very rapid pace of export sales has been widely
recognized, Good said.
"As of Sept. 27, U.S. export commitments accounted for nearly 82
percent of the USDA's forecast of exports for the year, with China
as the primary buyer," Good said. "The pace of sales obviously
cannot be sustained but has not yet created concerns of shortages.
The expectation of a large South American crop in 2013, ideas that
China has already bought more than the usual share of its needs, and
the possibility that the U.S. could import soybeans and/or soybean
meal next summer if needed imply sufficient supplies," Good said.
On the domestic side, the estimated size of the soybean crush in
September is not yet available.
"While corn and soybean prices have declined sharply from their
peaks, prices are still very high by any measure," Good said. "The
pace at which prices transition to lower levels will be determined
by a number of factors, beginning with the USDA's October production
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental